Seaspan's (SSW) CEO Gerry Wang on Q2 2014 Results - Earnings Call Transcript

Jul.29.14 | About: Seaspan Corporation (SSW)

Seaspan Corporation (NYSE:SSW)

Q2 2014 Earnings Conference Call

July 29, 2014 09:00 ET

Executives

Gerry Wang - Chief Executive Officer, Co-Chairman and Co-Founder

Sai Chu - Chief Financial Officer

Analysts

Keith Mori - Barclays

Christian Wetherbee - Citi

Ben Nolan - Stifel Nicolaus

Michael Webber - Wells Fargo

Operator

Welcome to the Seaspan Corporation Conference Call to discuss the financial results for the three and six months ended June 30, 2014. Hosting the call today is Gerry Wang, Chief Executive Officer, Co-Chairman and Co-Founder of Seaspan Corporation; and Sai Chu, Chief Financial Officer of Seaspan Corporation.

Mr. Wang and Mr. Chu will be making some introductory comments and then we will open the call for questions. I will now turn the call over to Sai Chu.

Sai Chu - Chief Financial Officer

Thanks, operator. Good morning, everyone and thank you for joining us today. Before we begin, please allow me to remind you that our discussion today contains forward-looking statements. Actual results may differ materially from our results projected by those forward-looking statements.

Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the second quarter of 2014 earnings release and earnings webcast presentation slides, available on our website www.seaspancorp.com, as well as in our Annual Report on Form 20-F for the year ended December 31, 2013 filed with the SEC.

I would also like to remind you that during this call we will discuss certain non-GAAP financial measures, including adjusted EBITDA, cash available for distribution to common shareholders, normalized net earnings and normalized earnings per share. For definitions of such non-GAAP financial measures and for reconciliations of such measures to the most closely comparable U.S. GAAP measures, please refer to our earnings release.

I will now pass the call over to Gerry who will discuss our second quarter highlights, as well as some recent developments.

Gerry Wang - Chief Executive Officer, Co-Chairman and Co-Founder

Thank you, Sai. Ladies and gentlemen, please turn to Slide 3 of the webcast presentation. During Q2, we continue to deliver on our stated strategies. We continue to grow our operating fleet with the delivery of a new eco-class 10,000 TEU vessel. Sorry, we – actually, it took a delivery of more than one vessel. We progress discussions with customers to time charter our vessels and grow our long-term contracted revenue base with demonstrated access to diverse sources of capital to fund our growth.

I will now review our highlights for the second quarter in more detail. First, we ended the quarter with 74 vessels in our operating fleet and then 78 vessels in our managed fleet. We took delivery of our second and third SAVER design containerships, the Hanjin Namu and the Hanjin Tabul, each of which has commanded 10-year time charters with Hanjin. Our operating fleet achieved 99.3% utilization for the quarter and continued to generate stable cash flows from long-term time charters. After the quarter end, we accepted delivery of the MOL Bravo, a 10,000 TEU SAVER design vessel currently on an eight-year time charter with MOL. This is the first of the 10-year charter with MOL. Our newbuilding program has been proceeding smoothly at all the three shipyards, YZJ, HHI and SSBC.

Second, we will progress discussions with our customers to secure long-term time charters for the remaining four 10,000 TEU vessels we ordered during that last quarter. We expect to finalize the charter discussions quite shortly. Further to this, we are also discussing further growth opportunities with several shipbuilders with several of our customers for these kinds of vessels and also larger vessels.

Third, we continue to access diverse sources of capital to fund our growth and improve our capital structure. There has been strong demand for Seaspan as we have raised more than $470 million in various capital market transactions this year. Finally, Seaspan is closely finalizing an expansion of the term of the right of the first refusal agreement with GCI for one year to March 31, 2016. For GCI joint venture we delivered on several important strategic objectives including diversification of funding sources and financial risk management, vessel purchasing economies of scale and operational economies of scale from our management of GCI fleet. Since GCI was formed we have expanded our managed fleet by 40 vessels and we have looked forward to continue our relationship with GCI and working on further growth opportunities.

I will now turn to the call over to Sai, our CFO to discuss our quarterly financial results, capital raises and forward guidance. Sai, please?

Sai Chu - Chief Financial Officer

Thanks Gerry. Please turn to Slide 5 where I will discuss our results for Q2 2014 compared to our Q2 2013. Revenue increased by $6.1 million or 3.6% due to the Hanjin Buddha and Namu 10,000 deliveries in March and May of this year and with two MOL 4600s delivered mid-2013. There were fewer unscheduled off-hire days and off-charter days offset by lower rates on re-charted vessels and an increase of scheduled dry dockings. Vessel utilization was strong at 99.3% compared to 99%. The improvement was primarily a result of fewer – 37 fewer unscheduled off-hire days.

Ship OpEx was $41.1 million, an increase of $3.7 million or 10%. Approximately a quarter of the increase was related to the two larger 10,000 class ships that we took delivery of, 2.2% of the increase was due to higher ownership and managed days reflecting the newbuild deliveries and the two MOL 4600s delivered in 2013. Remainder of the increase in OpEx relates to timing of stores, spares, repairs and ship management infrastructure costs as well as increases to crew wages that took effect in Q3 2013 and Q1 of this year. For the remainder of this year we expect quarterly ship OpEx to increase marginally each quarter as we take delivery of the larger ships, generally in line with the scheduled newbuild or rescheduled.

G&A was $7.5 million, a decrease of $4.4 million or 37% primarily due to a reduction of the non-cash expense of stock depreciation rates granted at the end of 2012 and Q1 of 2013. Adjusted EBITDA was $131 million, a $5 million or 4.2% increase over the prior year primarily due to the increase in our operating earnings from the growth in our fleet. These increases were partially offset by lower average re-chartered rates on certain vessels and OpEx as we mentioned previously.

Cash available for distribution was $68 million and almost $1 million increase or 1.2% due to the preceding factors combined with an increase in interest income partially offset by an increase in dividends as we raised preferred share capital and increasing the number of the outstanding common shares and from an increase of – in interest expense from at the hedge date rate.

Normalized EPS was $0.19 compared to $0.18. Normalized net earnings increased by $6.6 million or almost 26% this quarter. The increase is needed on a per share basis due to an increase in our Series D and E preferred shares and from an increase in our weighted average common share count from the 20 – Q4 2013 common offering, the drift and the compounding effect of the Series A preferred shares. Series A preferred shares automatically converted to common on January 30 due to the strength in our share price which was much higher than the $15 threshold.

Our EPS will continue to be affected from our capital funding program as we invest in of the largest newbuild programs in shipping. We feel this investment will result in long-term shareholder value as we take delivery of the ships. The dividend was consistent with the prior quarter, our Board declared our Q2 dividend of $0.345 per common share. We consider this to be a sustainable dividend level that balance is returned to shareholders while allowing us to maintain financial flexibility and take advantage of the attractive growth opportunities that exist in the current market.

Please turn to Slide 6 for our balance sheet information, where we will compare the Q2 of this year to Q4 2013. The $174 million increase in our total assets is primarily due to the operating vessels which have increased by over $225 million or close to 5%. Our debt and capital lease balances have increased by about $45 million from the Q1 refinancing of the $1 billion IPO facility and scheduled debt repayments over the first two quarters offset by our $345 million baby bond issuance and from draws from senior secured debt to fund our newbuilding program.

As Gerry mentioned our capital structure has evolved and diversified since the beginning of the year and the over the course of our life as a public company. We continue to execute our significant newbuild program and improve our financial flexibility. In April, we closed our first senior unsecured public notes offering, which we believe is one of the largest unrated, unsecured baby bond offerings and understand it to be the first baby bond for the shipping industry.

During May, we announced an aftermarket common equity program for up to $75 million, which we raised gross proceeds of almost $5 million during the quarter. In addition, we entered into a 360-day unsecured revolving loan facility, which provides access for $100 million in short-term liquidity from our key banking relationships. We continue to access the commercial bank market and entered into an $83 million loan with a European bank to fund another one of our 14,000 TEU vessels that will be chartered to be Yang Ming.

Finally, in July, we entered into two lease financings with Asian special purpose companies to fund the delivery of two of the MOL 10,000 vessels, which will provide $220 million in total gross proceeds. We drew on one of the facilities approximately two weeks ago upon the delivery of the MOL Bravo and expect to draw on the second lease facility in Q4. These lease financings provide Seaspan with another new source of financing at a very attractive cost of capital. These leases generate upfront cash for the company and reduce our capital needs as the inventories are higher than typical secured financings. Due to the high advance rates and lease accounting treatment, we anticipate that EBITDA and earnings contributions from these vessels will be lower than they would have been – had we financed them with traditional senior secured loan financing.

Please turn to Slide 7 for our latest forward guidance. During Q4, we expect to take delivery of another 10,000 vessel chartered to MOL, which we intend to finance through $110 million draw on the new lease facility that we have just mentioned. The remainder of our newbuild fleet we instruct to take delivery in 2015, six 14,000s chartered to Yang Ming, two 10,000s to MOL, and two 10,000s which we are currently working on charters for. During 2016, we have another two 14,000s to Yang Ming and another 10,000 to MOL.

Total expected CapEx for Q3 and Q4 of this year is just over $200 million. We expect to fund the rest of our newbuild fleet schedule to deliver during 2015 and ‘16 with a combination of debt facilities in place and facilities expected to be obtained and the remainder funded with cash on hand and other sources. During the remainder of this year, we expect to have a total of approximately 40 dry-docking days with 20 days in each of Q3 and Q4. This is expected to increase to approximately 240 days in 2015 and 200 in 2016. Each of these items remains subject to adjustment.

I would now like to turn the call back over to Gerry.

Gerry Wang - Chief Executive Officer, Co-Chairman and Co-Founder

Thanks, Sai. Please turn to Slide 8, where I will briefly discuss industry fundamentals. There has been a lot of discussion in the trade suppress about the rejection of the P3 alliance and the creation of the 2M alliance. We think the alliances are positive for the industry as this cooperation should allow the operators to earn better economic returns. However, we do not expect that the alliances will have a meaningful direct impact on our business.

On the supply side, we expect tonnage growth of about 6% to 7% for the year 2014. Major operators continue to manage supplies through widespread slow-streaming and incremental iteming of ships. The order book remains at approximately 20% of effective loading capacity or about 6% to 7% per annum on average, while vessel scrapping levels continue to be high, particularly for the 80s and the early 90s build vessels.

On the demand side, we expect global containership volume to grow by around 5% to 6% in the year 2014 as per various forecasts. Worth noting Asia, Europe container volumes have continued to increase this year in the range of 8% year-to-date, so a fairly balanced supply and demand situation overall.

Our customers demand for charter vessels is all about cost structure. Bunker costs about 30% to 45% of operator’s operating costs, so chartering a new eco-class vessels is imperative to bringing down that costs in line improving profitability. Our customers see us as a trusted operator and partner due to our track record of building, operating, large, modern, efficient containerships combined with our strong balance sheet and continued access to capital. We believe we are well-positioned to continue to capture a large portion of newbuilding growth opportunities and believe our focused strategy and leading market position will translate to long-term shareholder value.

Please turn to Slide 9. Slide 9 shows the staggered maturity profile of our charter portfolio. The average remaining charter length of our operating fleet is approximately five years. We have only one vessel that is up for re-charter for next month representing less than 1% of expected 2014 revenue. So far, we have added four 10,000 TEU SAVER design vessels to our fleet during 2014 and expect to take delivery of one more during the year. Including vessels that we manage for GCI, Seaspan now have the largest underwater fleet of containerships of all liner owners. In fact once we take delivery of our current newbuilds, we expect to have one of the 10 largest containership fleets in the world, including the liner measures. That being said, we still see opportunities for further growth and are in discussions with several of our customers for newbuild opportunities. We are also closely finalizing charters for our two un-chartered newbuilds and expect to announce that shortly.

Please turn to Slide 10, where I will reiterate our vision for the future. We believe Seaspan is well-positioned to continue to enhance as a leadership position and create shareholder value over the long-term. We will continue to pursue fleet growth with the controlled and balanced approach, being patient and disciplined and using our financial strength and technical and operational leadership position to capitalize on opportunities that meets our strict criteria. Our core focus will remain on designing, owning and chartering large, modern, fuel-efficient containerships to creditworthy customers.

We have a history of returning capital to shareholders and will remain committed to sustainable increasing our common share dividends over the long-term as we continue to opportunistically grow our business. As a ship leasing franchise, we consider it to be critical to consistently maintain a strong balance sheet diversifying our capital structure and enhancing our financial strength, including maintaining appropriate leverage will remain one of our top priorities. We expect our results may be muted in the next few years as we continue to invest in new vessels for our future. However, we also expect our strong – strong base of cash flows from existing charters as well as future growth will enable our franchise to be strong for the long-term value of our shareholders.

We would like now to open the call for questions. Operator, please begin.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Keith Mori of Barclays. Your line is open. Please go ahead.

Keith Mori - Barclays

Good morning, gentlemen. Thanks for taking my questions.

Gerry Wang

Good morning.

Keith Mori - Barclays

Gerry, you mentioned the supply and demand outlook over the next year you mentioned Asia is starting to pickup. Should we be thinking that we are seeing some idle capacity come out and better demand environment? Should we be thinking the inflection point is really here over the next 12 to 18 months where maybe you will start to see a ramp up in charter rates for the smaller ship classes that can kind of come through the market and see asset prices start to creep higher?

Gerry Wang

Good question. You look at today’s situation as I have just said, the demand and supply are fairly balanced with a 5% to 6% on each side as we talk right now for this Q3 – entering Q3, the volume especially to Europe and to North America is actually increasing there quite substantially, we are talking about 7% to 8% year-to-date. You look at the tonnage that is available to meet the demand is almost fully utilized. We see minimum idling right now. Typically, that is a good sign for a very good balance, but at the same time we have to take into account, the seasonality, I expect getting into Q4 and Q1 you will see more idling come up, but at the same time, I must say there is quite a bit of optimism in the industry right now. This may point to a recovery in the asset values and also the fair rates and at the same time the charter rates. And there is definitely a possibility we see on the horizon.

Keith Mori - Barclays

Okay, that’s good color. And I would like to follow up with that a little bit, if you start to see a tightening market improving asset prices you had mentioned previously that you look to buy at the low clearly. Should we be thinking that maybe the newbuild orders will kind of tail off here a little bit as we work through the next 12 or 18 months on the newbuild side given just what pricing has come up 15%, 20%, you are seeing increased competition in that particular market?

Gerry Wang

The newbuilding program will continue to be our bread and butter business. We are utilizing our churns in terms of our operational records and our very close relationships with the leading operators in this business. We see that potential to be really strong in our favor. I expect next 6 to 12 months we will have couple of deals to be announced and that we are positive about the growth prospects will be one of the reasons why we have extended our ROFR with GCI to continue to work together to take advantage of the growth opportunities ahead of us. As for the second hand vessels, what typically has been to take on order vessels? Couple of reasons. One is Seaspan always foresees homogenous organic growth, because we believe in our own design and technical management. We like to manage vessels that have come from our own hands in terms of design with the same main engine, same generators, the same layout and all those things, because that gives you the economies of scale, it gives you the homogenous management of all the assets in our hands. So, to make it very short, we continue to grow and we believe the growth potential is strong there. And we will probably refrain from grabbing second hand vessels as values come back in terms of second hand assets and probably will be the sellers more than the buyers.

Keith Mori - Barclays

That’s great. I appreciate the time. And I will pass it along. Thank you.

Gerry Wang

Thank you.

Operator

Thank you. Our next question comes from the line of Christian Wetherbee of Citi Research. Your line is open. Please go ahead.

Christian Wetherbee - Citi

Thanks. Good morning guys. Gerry, you just mentioned some muted financial performance, I guess muted performance I guess going forward as you are investing in the fleet, what do you think, take a step back I think bigger picture about what ultimately the best size of the fleet should be? I mean, how much more growth do you think ultimately is the right pace? I guess, I just want to get a rough sense of maybe where you see the business in three years or so from now? How much bigger do you think you want to get?

Gerry Wang

Very good question. Our vision is basically obviously we are the largest in this category in the world right now, but we will continue to solidify our leadership position and we expect to sort of do you get into the category of $10 billion in terms of asset base to get into $3 billion in terms of market capital, to get into the small cap, mix cap category that would be our objective and sometime to continue to drive down our leverage to become healthier, to become stronger and to become really a – one of the preferred choices for line operators with $10 billion I would expect our fleet – operating fleet will be around 100 to 120 vessels. At the end of day, the number of vessels doesn’t really matter. It’s all about the underlying asset values. Again we’ll be focused on capital intensive more than fleet, younger fleet. To answer the question just now, I mentioned if the market comes back on the asset value side probably we would be the sellers of the older vessels and continue to modernize our fleet with the new vessels coming and that will be sort of our forward vision in the next 3, 5 years that’s clearly something on – in our mind to become not only the largest, but also the best in the industry.

Christian Wetherbee - Citi

Okay, that’s really helpful color, I appreciate it. When you think about the SAVER design and the operational performance of those vessels as you are talking delivery and deploying them to the customers, how has the actual performance been in practice, are you getting good sort of feedback from the customer base just kind of curious from a technical perspective how that’s working out?

Gerry Wang

Well, the performance of the vessels has been exceptionally good and exceeding our expectations both from the operational perspective, the fuel consumption and also from the delivery schedule aspect, shipbuilder YZJ has done a terrific job delivering the vessels not only to meet the schedule, but to be all ahead of the schedule with the quality we anticipated. Obviously, we are putting a lot of efforts in terms of working with them with a strong supervision team our newbuilding department has been working vigorously to make sure those vessels are to be built to meet our requirements that we are more than pleased with the vessels we have taken delivery of. It’s one of the reasons why we have strong demand for this class. We have covered 21 vessels already of this class and the last four vessels were in the final stage of finalizing the charter party. We will have that coming out for announcement very shortly. Then we are looking at further order of this class or (indiscernible) or 18, 19 or 20 on dues, I think newbuild program is always our strength and that gives us tremendous advantages and we are going to continue with that strategy at the same time we will just manage our existing fleet very well to make sure our customers are happy. And one thing you have to keep in mind we are providing flagships to several operators in China, in Japan and in Taiwan as well as in Korea to operate the flagships obviously the tremendous privilege, but also it gives us the credit worthiness in the industry.

Christian Wetherbee - Citi

Absolutely, that makes complete sense. Do you – are major liner companies in a position now to be willing to accept anything other than in eco-ship at this point for a new charter opportunity, I guess I would just want to get a rough sense of the employability of non-eco ships?

Gerry Wang

Alright, at the end of day, there is – you look at the supply situation, if you break that into more details, you will find there is not enough eco-class vessels available. There are just too many older vessels available. At the end of day the line operators will have no choice, but to look at the older vessels for certain routes where speeds and fuel consumption won’t be that sensitive. The important thing is, for example, if we go at super-slow steaming then the advantage of eco-design will become relatively less. But at higher speeds at main trades of eco-class commence a tremendous advantage in terms of fuel consumption. So the line of measures we have to juggle to make sure they have enough carrying capacity to meet the demand. If you look at today’s idling situation properly the idling capacity is the minimum for several years and that’s a good sign of the utilization of vessels of all classes or ages and line of measures are very good at utilizing the vessels for various purposes of all ages. Certain charters will demand for really modern vessels for the economic benefits and our routes for slow steaming will see older vessels fit pretty well. So at the end of day it’s a dynamic situation we are in and when market is good everything gets employed.

Christian Wetherbee - Citi

Absolutely that makes complete sense. Thank you very much for the time. I appreciate it.

Gerry Wang

Thank you.

Operator

Thank you. Our next question comes from the line of Ben Nolan of Stifel Nicolaus. Your line is open. Please go ahead.

Ben Nolan - Stifel Nicolaus

Yes. Thanks. My first question relates to the one year extension that you guys did with ROFR to GCI, just sort of thinking about the rationale behind a one year extension, was there maybe any thought of consolidating GCI into Seaspan out right, is this or do you think this is going to be a process where just annually there is a one year roll over and it extends out at least into the foreseeable future in a similar fashion that it’s currently constructed?

Gerry Wang

It’s a very interesting question, obviously when our Board decided to extend the ROFR by one year several things that came into the discussions. And we obviously are always looking at our fleet expansion. You keep in mind all GCI vessels are technically, operationally, commercially managed by us. So this is – comes with no surprise that we are always interested in the fleet and GCI. So that’s as far as I can go for that part of the question as well as the extension of one year, we see some growth opportunities externally, organically we see – we still need one year to work together to take advantage of the growth potential we are working on right now. And so that’s – that would be the second part answer to your question.

Ben Nolan - Stifel Nicolaus

Okay. That’s interesting and the second question that I have is maybe for Sai or you Gerry you guys have this after money offering out there which you just very small amount was issued under – can you maybe talk me through how you think of using that capacity is it just sort of as needed basis or should we expect you to be dipping into that just on a regular basis or the course of the coming quarter and quarters?

Gerry Wang

Sai, Please.

Sai Chu

Hi, Ben, it’s Sai, that’s strictly opportunistic and from time-to-time we will be in the market if we think it’s a good opportunity here to raise capital and it’s good for our shareholders.

Ben Nolan - Stifel Nicolaus

Got it.

Sai Chu

So I can’t give you a forward guidance on it or what pricing level I don’t think any issue it really does in terms of the nature of the ATMs has changed considerably from the dark days and in the market in ‘08 to ‘10 and this is really done from a position of trading companies that do this today have strong growth profiles and they are raising capital on their terms so that’s good to go with...

Ben Nolan - Stifel Nicolaus

Alright, okay. Well, that’s it from me. I appreciate it. Thanks guys.

Gerry Wang

Thank you.

Operator

Thank you. (Operator Instructions) Our next question comes from the line of Michael Webber of Wells Fargo. Your line is open. Please go ahead.

Michael Webber - Wells Fargo

Hi, good morning, guys. How are you?

Gerry Wang

Good, how are you, Mike?

Michael Webber – Wells Fargo

Good. Most already been covered, but just a couple of points I want to touch on again. So, Gerry, you have spent a lot of time talking about growth and I just want to maybe kind of take a step back or another angle and sort of frame it up. If you think about the demand in the market right now from container lines for this on block deals of larger tonnage, on a year-over-year basis relative to where we were last summer, do you think it’s firmer now than was it at that point. And then kind of related to that, do you think there is more competition in the market now for those kind of deals considering we are seeing some of the marine MLPs start moving into containerships?

Gerry Wang

Mike, for the second half of this year, we will see firm demand for larger vessels partially because of the clear picture of P3 and off the top of this year as people were wondering that what would happen to P3, so there was some uncertainty there and that’s being cleared out right now and people are really pretty much into their own game in terms of fleet replacement and realigns formation and discussions. And there are a lot of discussions going on right now with the industry and at the same time the market is helpful given the volume, fair rates, moving favorably together. So, lot of buzz going on right now, lot of discussions and we expect some of those discussions will be translated into a very firmly requirements. And obviously we are being the mix of all those discussions given our leadership position, operating larger vessels probably is our capability. And I think you will see some competition probably on the smaller vessels. You might view one or two odd transactions here therefore one or two operators.

But for the mainstream business I think we have the leadership position which gives us the advantage, we are confident that we will be able to win some good deals in spite of competition. And we like competition, welcome competition that makes our life more interesting but at the same time while Seaspan give our leadership position we are very, very well-positioned. We are one of the very few companies that can go and deal with a line operator for 10 larger vessels or 11 larger vessels to say, hey, we can offer without subject to financing. I don’t think many people can do that to be honest. So we are focused on growth, growth, growth because we know growth would be important for us and that’s the reason why we extended the GCI for the growth. And as I mentioned the extension with GCI gives us a time and I cannot hype our interest in GCI fleet given we’ve technically, commercially and operational management, right.

Michael Webber - Wells Fargo

Right, now that makes sense. I mean, I guess maybe obviously outside of the GCI fleet when you are thinking about the deals that are in the markets there again versus the year ago or you met earlier this year or maybe a better question to recite, but where are the returns right now on those kind of deals either on an un-levered IRR basis or cash on cash whatever you want to use as they come 100 basis points or so or is it still pretty...

Gerry Wang

Pretty much similar and at the end of day financing is a big part of it, that’s part of our competitiveness, I don’t know if you have noticed the least deal we have done recently for two MOL vessels at $110 million each which is more than 100% of capital cost, financing or 100% at a very attractive interest rate and that gives us the advantage to compete. So, I am not really concerned about competitiveness to be honest from both the cost – financing and technical operational strength. All we care about is the end of day is to derive business in a right customer which is very important for us gives that we have to focus on the creative worthiness of our customers during good times or bad times gives ’08 to ’09 thought us a big lesson and taught the industry, the big lesson. At the end of day, you have to go with creative worthiness and the fact Seaspan has had 100% charter high collection record speaks to itself for our conservatism, our diligence and we just want to make sure we will continue with that discipline to do the right deals with the right customers, with the right ships and then we will be able to come up with the right financing, then the total package would make sense to us. So that’s how we look at each transaction. We pay very little attention frankly speaking to competition because at the end of the day we know we can compete.

Michael Webber - Wells Fargo

Okay. That’s fair. Just one more thing I will turn over and it’s probably for Sai. Sai and Jerry I guess at the end of his comments he mentioned that as you are gearing up and you are deploying capital the growth rate might be a bit more mid to near-term as we kind of go through that CapEx cycle again like we saw a couple of years ago, in the meantime when you look at your capital structure are there things obviously much more diversified right now than it was even a year or two ago are there things you can do from a capital structure perspective to kind of shake loose, I guess additional returns for shareholders or additional margin from a share, what can you do from a capital structure to kind of tighten things up if anything?

Sai Chu

Well, there are many things that we can do. I mean we constantly – our team looks at our capital structure and now from just a short-term basis, but a long-term basis and balancing out returns for our equity holders and all of our security holders along with managing risk properly. And there are things that we can do. I think the important thing here is our dividend is very sustainable, but we feel there is room to continue to grow it as we take delivery of the fleet. It is a significant investment we are making. But looking at the strategic picture that we have, we have the largest newbuild program in the industry and we financed a healthy chunk of it already. And as we continue to progress through the newbuild program there are things that we can do Gerry mentioned some of the unique financings that we have continued to do in the history of the company and developed new markets and investors for our capital and we end up delivering returns that in many cases exceed our expected returns. So it’s just execution as we continue to move on. And so there are things that we can tweak. However, it really is mid to long-term growth profile that we are looking at again. But we have captured a huge part of the order book and we still see opportunities going forward.

Michael Webber - Wells Fargo

Got it. Okay. That’s it and I will turn over. Thanks for the time.

Sai Chu

Thank you.

Operator

Thank you. And with no further questions in queue I would like to turn the conference back over to management for any closing remarks.

Gerry Wang - Chief Executive Officer, Co-Chairman and Co-Founder

Excellent. Thanks operator. Thanks for the participation of all the callers and those that listened to the presentation. And Seaspan as I said during the presentation will continue to grow our business in a very controlled and disciplined fashion and growth is a big deal to us. And we are committed to growing this company to become not only the largest, but also the best in the industry. And we are totally motivated and we are excited about our future. Once again, I want to thank you very much for your participation and continue to enjoy your great summer. Thank you very much. See you next quarter. Bye-bye.

Operator

Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program and you may all disconnect. Have a great rest of your day.

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