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Mar 05, 2019

Global Ship Lease Reports Results for the Fourth Quarter of 2018

LONDON, March 05, 2019 (GLOBE NEWSWIRE) -- Global Ship Lease, Inc. (NYSE:GSL) (the “Company” or “Global Ship Lease”), a containership charter owner, announced today its unaudited results for the three months and year ended December 31, 2018.

Fourth Quarter 2018 and Full Year Highlights

- Reported operating revenues of $50.0 million for the fourth quarter 2018.  Operating revenues for the year ended December 31, 2018 were $157.1 million. Operating revenues include the Poseidon Containers fleet acquired on November 15, 2018.

- Reported net loss(1) of $72.5 million for the fourth quarter 2018, after a non-cash impairment charge of $71.8 million.  For the year ended December 31, 2018, net loss was $60.4 million.

- Generated $26.6 million of Adjusted EBITDA(2) for the fourth quarter 2018.  Adjusted EBITDA for the year ended December 31, 2018 was $97.2 million.

- Normalized net income (1)(2), excluding costs and charges associated with the strategic combination, the non-cash impairment charge and the premium paid for amortization of our high yield notes, was $1.7 million for the fourth quarter 2018.  Normalized net income was $13.8 million for the year ended December 31, 2018.

- On October 29, 2018, announced the entry into a definitive agreement to merge with Poseidon Containers Holdings LLC and K&T Marine LLC (together, “Poseidon Containers”) in a stock-for-stock transaction, adding 19 containerships to the fleet and representing a total transaction value of over $780 million on an asset value basis, to create a leading containership charter owner focused on mid-sized and smaller vessels (the “Poseidon Transaction”). The Poseidon Transaction was completed on November 15, 2018. The combined company has a fleet of 38 vessels with a total capacity of 198,793 TEU, an average fleet age weighted by TEU capacity of 11.0 years, and contracted revenue as of December 31, 2018, net of address commission, of $648.2 million (based on the earliest possible redelivery date) and $791.1 million (based on the latest possible redelivery dates and including all options). The combined fleet had a charter-attached broker valuation of $1.33 billion as of December 31, 2018.

- On November 9, 2018, announced that Poseidon Containers had agreed five-year charters with CMA CGM for four of its 6,927 TEU containerships, Mary, Kristina, Katherine and Alexandra.  On December 10, 2018 announced two further five-year charters with CMA CGM for the 2015-built, 6,882 TEU containerships UASC Bubiyan and UASC Yas. The new charter for Mary commenced in October 2018, and the remaining five new charters will commence upon expiry of their existing charters during the first half of 2019.  The charters, which are each at gross rate of $25,910 per day and which add up to $279.4 million of contracted revenue, net of address commission, and are expected to deliver over $200.0 million of EBITDA over the term of the charters.

- On December 11, 2018, announced that the Annual Mandatory Offer to purchase up to $20.0 million aggregate principal amount of the outstanding 9.875% First Priority Secured Notes due 2022 (the “Notes”),  was fully subscribed. Accordingly, $20.0 million of Notes were purchased on December 12, 2018 at a purchase price of 102%, for an aggregate purchase price, inclusive of accrued and unpaid interest, of approximately $20.5 million.

 - On December 20, 2018, announced that the requisite consents had been received from holders of the Notes to approve certain amendments to the indenture governing the Notes.

George Youroukos, Executive Chairman of Global Ship Lease, stated, “2018 was a transformative year for Global Ship Lease, as we repositioned the Company, attained a significantly greater earnings potential, dramatically increased our NAV per share, and created an integrated, industry-leading management platform to unlock shareholder value.  Through a highly complementary merger, combining the downside protection of strong contract cover with the upside potential of exposure to recovering market fundamentals in our fleet segments, we have redefined the Company across all major metrics: more than doubling the size of the fleet, establishing a leverage profile that compares favorably with the peer group, extending the fleet’s average remaining contract duration, increasing the contracted revenue backlog, and adding vessels that are on average younger, larger, and better specified.  We are in a strong position to fully capitalize on GSL’s enhanced capabilities by pursuing our strategic priorities of realizing our fleet’s expanded upside potential through longer-term charters at attractive rates, improving our capital structure and cost of debt, and growing our fleet of modern, mid-sized and smaller containerships in an accretive manner.”

Ian Webber, Chief Executive Officer of Global Ship Lease,  commented, “The integration process for our combined company, with $1.3 billion in assets post-merger, is proceeding well, and we are delighted to have completed this transaction for the benefit of all shareholders. With the signing of six highly attractive five-year charters during the fourth quarter and the opportunistic refinancing of Poseidon Containers’ debt, our shareholders are already benefitting from an NAV uplift of over $145 million since the transaction was announced. Moving forward, we remain confident that the supply/demand fundamentals for mid-sized and smaller containerships are supportive, after years of limited new vessel orders and favorable demand growth across the most relevant tradelanes. These positive fundamentals, combined with the significantly enhanced operational and financial profile of the new Global Ship Lease, position us to move confidently forward as a leading provider of mid-sized and smaller containerships.”

SELECTED FINANCIAL DATA – UNAUDITED (thousands of U.S. dollars)

  Three
months
ended

Three
months
ended
   
  Year
 ended
Year
 ended
  December
31, 2018
December
31, 2017
December
31, 2018
December
31, 2017
         
Operating Revenues (3) 50,021 37,927 157,097 159,278 
Operating (Loss) (56,205) (72,178) (10,261) (15,353)
Net (Loss) (1) (72,503) (99,824) (60,426) (77,328)
Adjusted EBITDA (2) 26,577 24,841 97,241 110,303
Normalized Net Income (1)(2) 1,698  2,190  13,775  25,206
         

The results for the three months and year ended December 31, 2018 include the results of the Poseidon Containers containerships acquired on November 15, 2018 (the “Poseidon Containers Fleet”).  (1) Net loss and Normalized net income available to common shareholders.

(2) Adjusted EBITDA and Normalized net income are non-US Generally Accepted Accounting Principles (US GAAP) financial measures, as explained further in this press release, and are considered by Global Ship Lease to be useful measures of its performance.  For reconciliations of such non-GAAP financial measures to net loss, the most directly comparable US GAAP financial measure, please see “Reconciliation of Non-U.S. GAAP Financial Measures” below.

(3) Operating Revenues are net of address commissions. Brokerage commissions are included in Time charter and voyage expenses.

Following the Poseidon Transaction, minor reclassifications of expenses and balance sheet items have taken place.

Operating Revenues and Utilization

The Company’s fleet generated operating revenues from fixed-rate time charters of $50.0 million in the three months ended December 31, 2018, an increase of $12.1 million compared to $37.9 million for the comparative period in 2017, with the increase principally due to the addition of the Poseidon Containers Fleet on November 15, 2018, partially offset by reduced revenue from GSL Ningbo and OOCL Qingdao as the charters for these vessels renewed at lower rates. There were 2,656 ownership days in the quarter, an increase of 60% compared to 1,656 days in the comparable period in 2017, which was primarily due to the addition of the Poseidon Containers Fleet and GSL Valerie in June 2018. In the fourth quarter 2018, there was no planned offhire from regulatory drydocking, seven days of unplanned offhire and 30 days of idle time for one vessel between charters, giving an overall utilization of 98.6%.  There were a total of 10 days of unplanned offhire in the fourth quarter 2017, giving an overall utilization of 99.4%.  

For the year ended December 31, 2018, operating revenues were $157.1 million, a decrease of $2.2 million, or 1.4%, compared to $159.3 million in the prior year, notwithstanding the addition of the Poseidon Containers Fleet on November 15, 2018 and GSL Valerie, mainly for reduced revenue from GSL Ningbo and OOCL Qingdao as the charters for these vessels renewed at lower rates.

The table below shows our fleet utilization for the three months and years ended December 31, 2018 and 2017 and for the years ended December 31, 2016, 2015 and 2014.

               
  Three months ended Year ended  
  Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31,
Days 2018  2017  2018  2017  2016  2015  2014 
               
Ownership days 2,656   1,656   7,675   6,570   6,588   6,893   6,270  
Planned offhire - scheduled drydock 0   0   (34 ) (62 ) (100 ) (9 ) (48 )
Unplanned offhire (7 ) (10 ) (17 ) (40 ) (3 ) (7 ) (12 )
Idle time (30 ) 0   (47 ) 0   0   (13 ) (64 )
Operating days 2,619   1,646   7.577   6,468   6,485   6,864   6,146  
               
Utilization 98.6 % 99.4 % 98.7 % 98.4 % 98.4 % 99.6 % 98.0 %

There were two regulatory drydockings in 2018 and four in 2017.  Two regulatory drydockings are due in 2019.

Vessel Operating Expenses

Vessel operating expenses, which include costs of crew, lubricating oil, repairs, maintenance, insurance and management fees, were $18.1 million for the three months ended December 31, 2018, compared to $11.4 million in the prior year period.  The increase was due to 1,000 (up 60%) additional ownership days as a result of our acquisition of the Poseidon Containers Fleet and the addition of GSL Valerie in June 2018.  The average cost per ownership day in the quarter was $6,818, compared to $6,859 for the prior year period, down $41 per day.  

For the year ended December 31, 2018, vessel operating expenses were $49.3 million, or an average of $6,420 per day, compared to $42.7 million in the prior year or $6,499 per day, representing a reduction of $79 per day or 1.2%.

Time Charter and Voyage Expenses

Time charter and voyage expenses comprise mainly commission paid to third party ship brokers, the cost of bunker fuel for owner’s account when a vessel is off-hire or idle and miscellaneous costs associated with a vessel’s voyage.  Time charter and voyage expenses were $1.0 million for the three months ended December 31, 2018, compared to $0.3 million in the comparative period in 2017.  The increase was mainly due to the addition of the Poseidon Containers Fleet, all of which incur such commission, compared to our legacy vessels, where commission has been paid only for those which have completed their initial charters to CMA CGM or OOCL and which have been employed on a new charter obtained with the assistance of a broker.

Time charter and voyage costs were $1.6 million for the year ended December 31, 2018, compared to $1.0 million in the prior year; the increase was mainly due to the brokerage commission of the Poseidon Containers Fleet.

Depreciation and amortization

Depreciation and amortization for the three months ended December 31, 2018 was $10.8 million, compared to $9.4 million in the comparative period in 2017; the increase was mainly due to the addition of the Poseidon Containers Fleet offset by a reduction due to the effect of lower book values for a number of vessels following impairment charge taken in 2017.

Depreciation and amortization for the year ended December 31, 2018 was $35.5 million, compared to $38.0 million in the prior year with the overall reduction being for the reasons noted above.

Impairment

The Company’s accounting policies require that tangible fixed assets, such as vessels, are reviewed for impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable.

Charter rates in the spot market and asset values improved through the first half of 2018 but softened towards the end of the year.  While overall market developments are encouraging, taking into account the seasonal as well as cyclical nature of the container shipping industry, we determined that it would nonetheless be appropriate under US GAAP to review our legacy vessels for impairment as at December 31, 2018. There were no indications of impairment on any of the Poseidon Containers Fleet as they are recorded at less than fair value, as a result of the accounting for the Poseidon Transaction.  The review gave rise to a non-cash charge in the fourth quarter of 2018 of $71.8 million, as the sum of the expected undiscounted future cash flows from three vessels over their estimated remaining useful lives was less than the carrying amounts.  The impairment charge was equal to the amount by which the vessels’ carrying amounts exceed their fair values.  Fair value was assessed, on a vessel by vessel basis, at third party broker assessed charter attached valuations.

At December 31, 2017, our impairment review resulted in a non-cash charge in the fourth quarter of 2017 of $87.6 million, as the sum of the expected undiscounted future cash flows from five vessels over their estimated remaining useful lives was less than the carrying amounts.  The impairment charge was equal to the amount by which the assets’ carrying amounts exceed their fair values.  Fair value was assessed, on a vessel by vessel basis, as the net present value of estimated future cash flows, discounted by an appropriate discount rate. 

General and Administrative Expenses

General and administrative expenses were $4.6 million in the three months ended December 31, 2018, compared to $1.5 million in the same period in 2017. The increase was mainly due to retention and severance costs of $2.0 million and other costs associated with the Poseidon Transaction.

For the year ended December 31, 2018, general and administrative expenses were $9.2 million, compared to $5.4 million for 2017, the increase being for the reason noted above.

Adjusted EBITDA

As a result of the above, Adjusted EBITDA was $26.6 million for the three months ended December 31, 2018,  an increase  from $24.8 million for the three months ended December 31, 2017, mainly as a result of the addition of the Poseidon Containers Fleet.

Adjusted EBITDA for the year ended December 31, 2018 was $97.2 million, compared to $110.3 million for 2017 with the reduction mainly as a result of lower revenue on our legacy vessels, which was partially offset by the addition of the Poseidon Containers Fleet.

Interest Expense

Debt at December 31, 2018 totaled $889.3 million, comprising $340.0 million of indebtedness on our Notes and $34.8 million of indebtedness under a secured term loan, both collateralized by 18 our legacy vessels, $506.3 million bank debt collateralized by the Poseidon Containers Fleet and $8.2 million drawn under our growth facility and secured by one vessel.

Debt at December 31, 2017 totaled $414.8 million, comprised $360.0 million outstanding on our Notes and $54.8 million under a secured term loan, both of which were closed in October 2017 as part of a re-financing.  The net proceeds, together with cash on hand, were used to refinance our previous 10.000% notes due 2019 (“2019 Notes”).  In addition, all outstanding borrowings under both the previous revolving credit facility and the previous secured term loan were repaid and terminated.

Interest expense for the three months ended December 31, 2018, including on the debt assumed as part of the Poseidon Transaction on November 15, 2018, was $16.2 million, a decrease of $10.8 million on the interest expense for the three months ended December 31, 2017 of $27.0 million.  Interest expense in the comparative period included charges associated with the refinancing of our 2019 Notes and other debt, which was completed in October 2017, and which resulted in a premium paid on the redemption of the 2019 Notes of $8.7 million, the write off of the remaining balance of original issue discount associated with the 2019 Notes of $1.4 million and the write off of the remaining balance of deferred financing charges of $4.3 million associated with debt repaid.

For the year ended December 31, 2018, interest expense was $48.7 million, a decrease of $10.7 million on interest expense of $59.4 million for the year ended December 31, 2017.  The reduction was mainly due to the reasons noted above.

Interest income for the three months ended December 31, 2018 was $0.4 million, an increase of $0.2 million compared to the same period in 2017. The increase was mainly due to higher average cash balances and increased interest rates.  Interest income for the year ended December 31, 2018 was $1.4 million, compared to $0.5 million in 2017.

Other income, net

Other income, net is mainly comprised of gains in bunkers following deliveries and redeliveries of vessels from charterers and passenger income.  Other income, net was $0.2 million in the three months ended December 31, 2018, compared to $1,000 in the prior year period; the increase was mainly due to the addition of the Poseidon Containers Fleet.

For the year ended December 31, 2018, other income, net was $0.2 million, compared to $51,000 for 2017. 
Taxation
Taxation for the three months ended December 31, 2018 was a credit of $4,000 compared to a charge of $9,000 in the fourth quarter of 2017.

Taxation for the year ended December 31, 2018 was a charge of $55,000, compared to $40,000 for 2017. 

Earnings Allocated to Preferred Shares
The Series B Preferred Shares carry a coupon of 8.75%, the cost of which for the three months ended December 31, 2018 was $0.8 million, the same as in the comparative period.
The cost in the year ended December 31, 2018 was $3.1 million, the same as in the comparative period.
Net (Loss) Available to Common Shareholders and Normalized Net Income

Net loss for the three months ended December 31, 2018 was $72.5 million after the non-cash impairment charge of $71.8 million.  For the three months ended December 31, 2017, net loss was $99.8 million, after the costs and charges totaling $14.4 million associated with the debt refinancing completed in October 2017 and the non-cash impairment charge of $87.6 million.

Normalized net income for the three months ended December 31, 2018 was $1.7 million, adjusting for the non-cash impairment charge and costs associated with the Poseidon Transaction, compared to $2.2 million in the comparative period in 2017, adjusting mainly for the non-cash impairment charge and charges associated with the refinancing.

Net loss was $60.4 million for the year ended December 31, 2018 after the $71.8 million non-cash impairment charge.  Net loss was $77.3 million for the year ended December 31, 2017 after the costs and charges totaling $14.4 million associated with the refinancing completed in October 2017 and the non-cash impairment charge of $87.6 million.

Normalized net income for the year ended December 31, 2018 was $13.8 million compared to $25.2 million for the prior year.

Fleet

The following table provides information about our on-the-water fleet of 38 vessels as at December 31, 2018.

                 
Vessel Name TEUs Lightweight (tons) Year Built Charterer Earliest Charter
Expiry Date
Latest Charter
Expiry Date
Daily Charter
Rate $
               
CMA CGM Thalassa 11,040 38,577 2008 CMA CGM 4Q25 1Q26 47,200
UASC Al Khor(1) 9,115 31,764 2015 Hapag-Lloyd 1Q19 2Q19 40,000
Anthea Y(1) 9,115 31,890 2015 COSCO 2Q20 3Q20 39,200
Maira XL(1) 9,115 31,820 2015 COSCO 2Q20 3Q20 39,200
GSL Tianjin 8.063(12) 34,243 2005 CMA CGM 2Q19 3Q19 11,900(2)
OOCL Qingdao 8,063(12) 34,305 2004 OOCL 1Q19 2Q19 14,000
GSL Ningbo 8,063(12) 34,243 2004 Maersk 2Q19 4Q20 12,100(3)
Mary(1) 6,927 23,424 2013 CMA CGM 3Q23 4Q23 25,910
Kristina (1) 6,927 23,424 2013 Wan Hai 2Q19 3Q19(4) 19,500(4)
Katherine(1) 6,927 23,424 2013 MSC 1Q19 1Q19(4) 13,500(4)
Alexandra(1) 6,927 23,424 2013 ONE 1Q19 2Q19(4) 20,750(4)
UASC Bubiyan(1) 6,882 23,919 2015 Hapag-Lloyd 1Q19 2Q19(4) 20,000(4)
UASC Yas(1)(11) 6,882 23,864 2015 Hapag-Lloyd 1Q19 2Q19(4) 20,000(4)
CMA CGM Berlioz 6,621 26,776 2001 CMA CGM 2Q21 4Q21 34,000
Agios Dimitrios 6,572 24,746 2011 MSC 3Q19 4Q19(5) 12,500(5)
Tasman 5,936 25,010 2000 ZIM 1Q19 3Q19(6) 16,350(6)
Dimitris Y 5,936 25,010 2000 ZIM 2Q19 3Q19 16,750
Ian H 5,936 25,128 2000 ZIM 2Q19 3Q19 17,000
Dolphin II 5,095 20,596 2007 HMM 2Q19 4Q19(7) 7,700(7)
Orca I 5,095 20,696 2006 ZIM 2Q19 3Q19 11,750
CMA CGM Alcazar 5,089 20,087 2007 CMA CGM 4Q20 2Q21 33,750
CMA CGM Château d’If 5,089 20,100 2007 CMA CGM 4Q20 2Q21 33,750
CMA CGM Jamaica 4,298 17,272 2006 CMA CGM 3Q22 1Q23 25,350
CMA CGM Sambhar 4,045 17,355 2006 CMA CGM 3Q22 1Q23 25,350
CMA CGM America 4,045 17,355 2006 CMA CGM 3Q22 1Q23 25,350
GSL Valerie 2,824 11,971 2005 CMA CGM 2Q19 3Q19 9,000
Athena 2,762 13,538 2003 MSC 1Q19 2Q19 9,000
Maira 2,506 11,453 2000 MSC 1Q19 1Q19(8) 9,000(8)
Nikolas 2,506 11,370 2000 MSC 1Q19 2Q19 9,000
New Yorker 2,506 11,463 2001 MSC 1Q19 2Q19 9,000
CMA CGM La Tour 2,272 11,742 2001 CMA CGM 3Q19 1Q20 15,300
CMA CGM Manet 2,272 11,742 2001 CMA CGM 3Q19 1Q20 15,300
CMA CGM Matisse 2,262 11,676 1999 CMA CGM 3Q19 1Q20 15,300
CMA CGM Utrillo 2,262 11,676 1999 CMA CGM 3Q19 1Q20 15,300
GSL Keta 2,207 11,731 2003 ANL 2Q19 3Q19 8,450
GSL Julie 2,207 11,731 2002 CMA CGM 1Q19 1Q19(9) 7,800(9)
Kumasi 2,207 11,731 2002 CMA CGM 4Q19 1Q21(10) 9,800(10)
Marie Delmas 2,207 11,731 2002 CMA CGM 4Q19 1Q21(10) 9,800(10)
                 
  1. Modern design, high reefer capacity, fuel efficient vessels.
  2. Rate increased to $13,000 per day from January 26, 2019.
  3. Rate increases to $12,400 per day from April 21, 2019 and to $18,000 per day from September 21, 2019.
  4. Thereafter, five years to CMA CGM at $25,910 per day.
  5. Thereafter, option for four years at $20,000 per day, callable by us.
  6. Extended after December 31, 2018 at $11,500 per day to July 17, 2019 plus or minus 30 days.
  7. Rate increases to $11,500 per day from August 15, 2019.
  8. Extended after December 31, 2018 at $8,500 per day to August 17, 2020 plus or minus 30 days.
  9. Rate $7,800 per day and, agreed after December 31, 2018, $7,200 per day from March 16, 2019 to between August 16, 2019 and October 16, 2019, at charterer’s option, with an option in favour of charterer to extend from October 16, 2019 at $8,500 per day for six months plus or minus 30 days.   
  10. Option at $9,800 per day to December 31, 2020 plus or minus 90 days, callable by us.
  11. To be renamed as M/V Olivia I effective March 19, 2019.
  12. These vessels’ capacity is targeted to be upgraded to 8,600 TEU (subject class approval).                                     

Conference Call and Webcast

Global Ship Lease will hold a conference call to discuss the Company's results for the three months ended December 31, 2018 today, Tuesday March 5, 2019 at 10:30 a.m. Eastern Time. There are two ways to access the conference call:

   (1) Dial-in: (877) 445-2556 or (908) 982-4670; Passcode: 5749817
Please dial in at least 10 minutes prior to 10:30 a.m. Eastern Time to ensure a prompt start to the call.

   (2) Live Internet webcast and slide presentation: http://www.globalshiplease.com

If you are unable to participate at this time, a replay of the call will be available through Thursday, March 21, 2019 at (855) 859-2056 or (404) 537-3406. Enter the code 5749817 to access the audio replay. The webcast will also be archived on the Company’s website: http://www.globalshiplease.com.

Annual Report on Form 20-F

The Company’s Annual Report for 2017 is on file with the Securities and Exchange Commission.  A copy of the report can be found under the Investor Relations section (Annual Reports) of the Company’s website at http://www.globalshiplease.com   Shareholders may request a hard copy of the audited financial statements free of charge by contacting the Company at info@globalshiplease.com or by writing to Global Ship Lease, Inc, care of Global Ship Lease Services Limited, Portland House, Stag Place, London SW1E 5RS or by telephoning +44 (0) 207 869 8806.

About Global Ship Lease

Global Ship Lease is a leading independent owner of containerships with a diversified fleet of mid-sized and smaller containerships. Incorporated in the Marshall Islands, Global Ship Lease commenced operations in December 2007 with a business of owning and chartering out containerships under mainly long-term, fixed-rate charters to top tier container liner companies.  On November 15, 2018, it completed a strategic combination with Poseidon Containers.

Global Ship Lease owns 38 vessels ranging from 2,207 to 11,040 TEU, of which nine are fuel efficient new-design wide beam, with a total capacity of 198,793 TEU and an average age, weighted by TEU capacity, of 11.0 years determined as at December 31, 2018.

The average remaining term of the charters at December 31, 2018 was 2.5 years on a TEU-weighted basis.

Reconciliation of Non-U.S. GAAP Financial Measures

A. Adjusted EBITDA

Adjusted EBITDA represents net loss before interest income and expense including amortization of deferred finance costs, earnings allocated to preferred shares, income taxes, depreciation, amortization of  drydocking costs and impairment.  Adjusted EBITDA is a non-US GAAP quantitative measure used to assist in the assessment of the Company's ability to generate cash from its operations.  We believe that the presentation of Adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry.  Adjusted EBITDA is not defined in US GAAP and should not be considered to be an alternate to Net income or any other financial metric required by such accounting principles.  Our use of Adjusted EBITDA may vary from the use of similarly titled measures by others in our industry.

ADJUSTED EBITDA - UNAUDITED

(thousands of U.S. dollars)  


    Three Three    
    months months Year Year
    ended ended ended ended
    Dec 31, Dec 31, Dec 31, Dec 31,
    2018  2017  2018  2017 
           
Net (loss) available to common shareholders (72,503 ) (99,824 ) (60,426 ) (77,328 )
           
Adjust: Depreciation and amortization 10,752   9,394   35,455   37,981  
  Impairment 71,834   87,624   71,834   87,624  
  Interest income (441 ) (154 ) (1,425 ) (489 )
  Interest expense 16,174   27,027   48,686   59,413  
  Earnings allocated to preferred shares 765   765   3,062   3,062  
  Income taxes (4 ) 9   55   40  
           
Adjusted EBITDA 26,577   24,841   97,241   110,303  
                 

B. Normalized net income

Normalized net income represents net loss adjusted for the premium paid on redemption of notes, together with the related write-off of deferred financing charges and original issue discount, for impairment charges and the staff retention and severance costs associated with the Poseidon Transaction. Normalized net loss is a non-GAAP quantitative measure which we believe will assist investors and analysts who often adjust reported net loss for items that do not affect operating performance or operating cash generated. Normalized net income is not defined in US GAAP and should not be considered to be an alternate to net income or any other financial metric required by such accounting principles.  Our use of Normalized net income may vary from the use of similarly titled measures by others in our industry.

   
NORMALIZED NET INCOME - UNAUDITED  
(thousands of U.S. dollars)  


    Three Three    
    months months Year Year
    ended ended Ended ended
    Dec 31, Dec 31, Dec 31, Dec 31,
    2018  2017  2018  2017 
           
Net (loss) available to common shareholders (72,503 ) (99,824 ) (60,426 ) (77,328 )
           
Adjust: Impairment charges 71,834   87,624   71,834   87,624  
  Staff retention and severance costs associated with the Poseidon transaction 1,967   ---   1,967   ---  
  Premium paid on redemption of 2022 Notes 400   ---   400   ---  
  Premium paid on redemption of 2019 Notes ---   8,657   ---   9,047  
  Accelerated write-off of deferred financing charges related to 2019 Notes ---   4,310   ---   4,371  
  Accelerated write-off of original issue discount related to 2019 notes ---   1,423   ---   1,492  
Normalized net income 1,698   2,190   13,775   25,206  
                 


Safe Harbor Statement

This communication contains forward-looking statements. Forward-looking statements provide Global Ship Lease's current expectations or forecasts of future events. Forward-looking statements include statements about Global Ship Lease's expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as "anticipate," "believe," "continue," "estimate," "expect," "intend," "may," "ongoing," "plan," "potential," "predict," "project," "will" or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. These forward-looking statements are based on assumptions that may be incorrect, and Global Ship Lease cannot assure you that these projections included in these forward-looking statements will come to pass. Actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors.

The risks and uncertainties include, but are not limited to:

  • future operating or financial results;
  • expectations regarding the future growth of the container shipping industry, including the rates of annual demand and supply growth;
  • the financial condition of our charterers, particularly CMA CGM, our principal charterer and main source of operating revenue, and their ability to pay charterhire in accordance with the charters;
  • Global Ship Lease’s financial condition and liquidity, including its level of indebtedness or ability to obtain additional financing to fund capital expenditures, vessel acquisitions and other general corporate purposes;
  • Global Ship Lease’s ability to meet its financial covenants and repay its credit facilities;
  • Global Ship Lease’s expectations relating to dividend payments and forecasts of its ability to make such payments including the availability of cash and the impact of constraints under its credit facility;
  • risks relating to the acquisition of Poseidon Containers and Global Ship Lease’s ability to realize the anticipated benefits of the acquisition;
  • future acquisitions, business strategy and expected capital spending;
  • operating expenses, availability of crew, number of off-hire days, drydocking and survey requirements and insurance costs;
  • general market conditions and shipping industry trends, including charter rates and factors affecting supply and demand;
  • assumptions regarding interest rates and inflation;
  • changes in the rate of growth of global and various regional economies;
  • risks incidental to vessel operation, including piracy, discharge of pollutants and vessel accidents and damage including total or constructive total loss;
  • estimated future capital expenditures needed to preserve its capital base;
  • Global Ship Lease’s expectations about the availability of ships to purchase, the time that it may take to construct new ships, or the useful lives of its ships;
  • Global Ship Lease’s continued ability to enter into or renew long-term, fixed-rate charters or other vessel employment arrangements;
  • the continued performance of existing long-term, fixed-rate time charters;
  • Global Ship Lease’s ability to capitalize on its management’s and board of directors’ relationships and reputations in the containership industry to its advantage;
  • changes in governmental and classification societies’ rules and regulations or actions taken by regulatory authorities;
  • expectations about the availability of insurance on commercially reasonable terms;
  • unanticipated changes in laws and regulations including taxation;
  • potential liability from future litigation.

Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Global Ship Lease's actual results could differ materially from those anticipated in forward-looking statements for many reasons specifically as described in Global Ship Lease's filings with the U.S Securities and Exchange Commission (the “SEC”).  Accordingly, you should not unduly rely on these forward-looking statements, which speak only as of the date of this communication. Global Ship Lease undertakes no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this communication or to reflect the occurrence of unanticipated events. You should, however, review the factors and risks Global Ship Lease describes in the reports it will file from time to time with the SEC after the date of this communication.


 
Global Ship Lease, Inc.

Interim Unaudited ConsolidatedStatements of Income

(Expressed in thousands of U.S. dollars)
 
    Three months ended
December 31,
Year ended
December 31,
    2018     2017     2018     2017  
OPERATING REVENUES                
Time charter revenue   16,667     7,078     30,890     35,334  
Time charter revenue - related party   33,354     30,849     126,207     123,944  
    50,021      37,927      157,097      159,278   
OPERATING EXPENSES:                
Vessel operating expenses   17,170     10,959     47,584     41,098  
Vessel operating expenses - related parties   938     400     1,689     1,599  
Time charter and voyage expenses   739     276     1,352     962  
Time charter and voyage expenses - related party   222         222      
Depreciation and amortization   10,752     9,394     35,455     37,981  
Impairment of vessels   71,834     87,624     71,834     87,624  
General and administrative expenses   4,571     1,452     9,221     5,367  
Operating loss     (56,205 )     (72,178 )     (10,260 )     (15,353 )
                 
NON OPERATING INCOME/(EXPENSE)                
Interest income   441     154     1,425     489  
Interest and other financial expenses   (16,174 )   (27,027 )   (48,686 )   (59,413 )
Other income, net   196     1     212     51  
Total non operating expense     (15,537 )     (26,872 )     (47,049 )     (58,873 )
Loss before income taxes     (71,742 )     (99,050 )     (57,309 )     (74,226 )
Income taxes   4     (9 )   (55 )   (40 )
Net Loss      (71,738 )     (99,059 )     (57,364 )     (74,266 )
Earnings allocated to Series B Preferred shares   (765 )   (765 )   (3,062 )   (3,062 )
Net Loss available to Common Shareholders     (72,503 )     (99,824 )     (60,426 )     (77,328 )
Earnings/(Loss) per Share                
Weighted average number of Class A common shares outstanding                
Basic and diluted (including RSU’s without service conditions)   60,907,958     47,976,722     52,115,118     47,975,889  
                 
                 
Net Loss per Class A common share                
Basic and diluted (including RSU’s without service conditions)   (0.64 )   (2.08 )   (0.93 )   (1.61 )
                 
                 
Weighted average number of Class B common shares outstanding                
Basic and diluted   7,405,956     7,405,956     7,405,956     7,405,956  
                 
Net Loss per Class B common share                
Basic and diluted   nil   nil   nil   nil
                 
                 



 
Global Ship Lease, Inc.

Interim Unaudited ConsolidatedBalance Sheets

(Expressed in thousands of U.S. dollars)
 
      As of  
      December 31,
2018
  December 31,
2017
ASSETS          
CURRENT ASSETS          
Cash and cash equivalents     82,059     73,266  
Restricted cash     2,186      
Accounts receivable, net     1,927     72  
Inventories     5,769     742  
Prepaid expenses and other current assets     6,214     1,376  
Due from related parties     817     1,932  
Total current assets     98,972     77,388  
NON-CURRENT ASSETS          
Vessels in operation     1,112,766     586,520  
Other fixed assets     5     10  
Intangible assets - charter agreements     5,400     700  
Intangible assets - other         7  
Deferred charges, net     9,569     11,259  
Other non-current assets     948      
Restricted cash, net of current portion     5,827      
Total non-current assets     1,134,515     598,496  
TOTAL ASSETS     1,233,487     675,884  
LIABILITIES AND STOCKHOLDERS' EQUITY          
CURRENT LIABILITIES          
Accounts payable     9,586     1,486  
Accrued liabilities     15,407     8,788  
Current portion of long-term debt     64,088     40,000  
Deferred revenue     3,118     2,178  
Due to related parties     3,317     2,813  
Total current liabilities     95,516     55,265  
LONG-TERM LIABILITIES          
Long-term debt, net of current portion and deferred financing costs     813,130     358,515  
Intangible liability - charter agreements     8,470     10,482  
Deferred tax liability     9     17  
Total non-current liabilities     821,609     369,014  
TOTAL LIABILITIES     917,125     424,279  
Commitments and Contingencies          
STOCKHOLDERS' EQUITY          
Class A common stock-authorized
214,000,000 shares with a $0.01 par value
72,137,965 shares issued and outstanding (2017 – 47,609,734 shares)
    721     476  
Class B common stock-authorized
20,000,000 shares with a $0.01 par value
7,405,956 issued and outstanding (2017 – 7,405,956 shares)
    74     74  
Series B Preferred shares-authorized
16,100 shares with a $0.01 par value
14,000 shares issued and outstanding (2017 – 14,000 shares)
         
Series C Preferred shares - authorized
250,000 shares with a $0.01 par value
250,000 shares issued and outstanding (2017 - nil)
    3      
Additional paid in capital     511,683     386,748  
Accumulated deficit     (196,119 )   (135,693 )
Total stockholders' equity     316,362     251,605  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     1,233,487     675,884  



 
Global Ship Lease, Inc.

Interim Unaudited Consolidated Statements of Cash Flows

(Expressed in thousands of U.S. dollars)
 
  Three months ended
December 31,
  Year ended
December 31,
  2018     2017     2018     2017  
Cash flows from operating activities:              
Net loss (71,738 )   (99,059 )   (57,364 )   (74,266 )
Adjustments to reconcile net income to net cash provided by operating activities:              
Depreciation and amortization 10,752     9,394     35,455     37,981  
Vessel impairment 71,834     87,624     71,834     87,624  
Amortization of deferred financing costs 1,498     5,159     4,629     7,772  
Amortization of original issue discount/premium on repurchase of notes 605     1,640     1,207     2,523  
Amortization of intangible liability/assets-charter agreements 24     (451 )   (1,305 )   (1,807 )
Share based compensation (86 )   272     50     272  
Changes in operating assets and liabilities:              
Decrease (increase) in accounts receivable and other assets 7,361     1,464     5,019     (441 )
Decrease (increase) in inventories 331     (113 )   (2,250 )   (188 )
(Decrease) increase in accounts payable and other liabilities (15,252 )   5,465     (9,117 )   (3,030 )
(Increase) decrease in related parties' balances (22 )   465     (625 )   1,138  
Increase (decrease) in deferred revenue 972     (670 )   214     238  
Unrealized foreign exchange (gain) loss (9 )   (4 )   (5 )   2  
Net cash provided by operating activities 6,270     11,186     47,742     57,818  
Cash flows from investing activities:              
Cash paid for vessels         (11,436 )    
Net proceeds from sale of vessels 14,504         14,504      
Cash paid for vessel improvements (89 )   (155 )   (239 )   (255 )
Cash paid for other assets             (8 )
Cash paid for drydockings (532 )       (2,636 )   (4,632 )
Cash acquired in Poseidon Transaction, net of capitalized expenses 24,037          

24,037
     

 
Net cash provided by/(used in) investing activities 37,920     (155 )   24,230     (4,895 )
Cash flows from financing activities:              
Proceeds from issuance of secured notes     356,400         356,400  
Repurchase of secured notes (20,400 )   (346,287 )   (20,400 )   (365,788 )
Proceeds from drawdown of credit facilities  —     54,800     8,125     54,800  
Repayment of credit facilities (27,771 )   (54,800 )   (37,771 )   (63,575 )
Deferred financing costs paid (246   (12,675 )   (2,058 )   (12,675 )
Series B Preferred Shares-dividends paid (765 )   (765 )   (3,062 )   (3,062 )
Net cash used in  financing activities (49,182 )   (3,327 )   (55,166 )   (33,900 )
Net (decrease) increase in cash and cash equivalents and restricted cash (4,992 )   7,704     16,806     19,023  
Cash and cash equivalents and restricted cash at beginning of the period 95,064     65,562     73,266     54,243  
Cash and cash equivalents and restricted cash at end of the period 90,072     73,266     90,072     73,266  

Investor and Media Contacts:
The IGB Group
Bryan Degnan
646-673-9701
or
Leon Berman
212-477-8438

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Source: Global Ship Lease, Inc.

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