OREANDA-NEWS. Global Ship Lease, Inc. (NYSE:GSL), a containership charter owner, announced today its unaudited results for the three months and six months ended June 30, 2016.

Second Quarter and Year To Date Highlights

- Reported revenue of $41.3 million for the second quarter 2016. Revenue for the six months ended June 30, 2016 was $83.9 million

- Reported net income of $6.0 million for the second quarter 2016.  For the six months ended June 30, 2016, net income was $10.6 million

- Generated $28.8 million of Adjusted EBITDA(1) for the second quarter 2016.  Adjusted EBITDA for the six months ended June 30, 2016 was $58.1 million

- Normalized net income(1) was $5.6 million for second quarter 2016. Normalized net income was $11.1 million for the six months ended June 30, 2016

- Purchased and subsequently cancelled $4.2 million of the outstanding 10.0% First Priority Secured Notes (the “Notes”).

Ian Webber, Chief Executive Officer of Global Ship Lease, stated, “In the second quarter of 2016, Global Ship Lease continued to operate in a highly efficient and cost-effective manner, maximizing the value of our long-term, fixed-rate contracts with high-quality counterparties. Despite the challenging environment facing the broader containership industry, we remain fully insulated from any spot charter market exposure and continue to create value for our shareholders.”

Mr. Webber continued, “Increased levels of scrapping and controlled new vessel ordering should result in an improved balance between supply and demand, particularly for the mid-sized and smaller vessel segment which is the focus of our fleet. Our strong capital structure and stable cash flows position us well to pursue attractive vessel acquisitions and opportunistically delever.”

SELECTED FINANCIAL DATA – UNAUDITED

(thousands of U.S. dollars)

  Three   Three   Six   Six
  months
ended		   months
ended		   months
 ended		   months
ended
  June 30,
2016		   June 30,
2015		   June 30,
2016		   June 30,
2015
               
Revenue 41,333   40,987   83,943   78,706
Operating Income 17,921   15,457   36,306   28,109
Net Income for Common Shareholders 6,043   2,876   10,600   2,900
Adjusted EBITDA (1) 28,798   26,879   58,118   50,510
Normalized Net Income (Loss) (1) 5,632   2,876   11,061   2,900
               

(1) Adjusted EBITDA, Normalized net (loss) income, and Cash available for distribution are non-US Generally Accepted Accounting Principles (US GAAP) measures, as explained further in this press release, and are considered by Global Ship Lease to be useful measures of its performance.  Reconciliations of such non-GAAP measures to the interim unaudited financial information are provided in this Earnings Release.

Revenue and Utilization

The 18-vessel fleet generated revenue from fixed-rate, mainly long-term time, charters of $41.3 million in the three months ended June 30, 2016, up $0.3 million (or 1%) on revenue of $41.0 million for the comparative period in 2015, due mainly to the addition of OOCL Ningbo from September 17, 2015 at a daily charter rate of $34,500, offset by reduced revenue from the disposals of Ville d’Aquarius and Ville d’Orion in fourth quarter 2015 and from a higher level of planned offhire related to three scheduled dry-dockings in second quarter 2016.  There were 1,638 ownership days in the quarter, down 5.3%, representing one (net) less vessel in the fleet, on the comparable period in 2015. There were 51 days of planned offhire for scheduled dry-dockings and two days of unplanned offhire for the three months ended June 30, 2016, giving a utilization of 96.8%.  In the comparable period of 2015, there were two days of unplanned offhire for utilization of 99.9%.

For the six months ended June 30, 2016, revenue was $83.9 million, up $5.2 million (or 6.7%) on revenue of $78.7 million in the comparative period, mainly due to the additions of OOCL Qingdao from March 11, 2015 and OOCL Ningbo from September 17, 2015, as above, offset by the effect of the disposals of Ville d’Aquarius and Ville d’Orion and higher offhire from planned dry-dockings.

The table below shows fleet utilization for the three and six months ended June 30, 2016 and 2015, and for the years ended December 31, 2015, 2014, 2013 and 2012.

                   
   Three months ended  Six months ended      
  June 30, June 30, June 30, June 30,   Dec 31, Dec 31, Dec 31, Dec 31,
Days   2016     2015     2016     2015       2015     2014     2013     2012  
                   
Ownership days   1,638     1,729     3,276     3,370       6,893     6,270     6,205     6,222  
Planned offhire - scheduled dry-dock   (51 )   0     (51 )   (9 )     (9 )   (48 )   (21 )   (82 )
Unplanned offhire   (2 )   (2 )   (2 )   (5 )     (7 )   (12 )   (7 )   (16 )
Idle time   0     0     0     0       (13 )   (64 )   0     0  
Operating days   1,585     1,727     3,223     3,356       6,864     6,146     6,177     6,124  
                   
Utilization   96.8 %   99.9 %   98.4 %   99.6 %     99.6 %   98.0 %   99.5 %   98.4 %
                                                   

 

Depreciation

Depreciation for the three months ended June 30, 2016 was $10.9 million, compared to $11.4 million in the second quarter 2015, with the reduction being due to one (net) fewer vessel in the fleet.

Depreciation for the six months ended June 30, 2016 was $21.8 million, compared to $22.4 million in the comparative period, with the reduction being due to the one (net) fewer vessels in the fleet.

General and Administrative Costs

General and administrative costs were $1.3 million in the three months ended June 30, 2016, compared to $1.5 million in the second quarter of 2015.

For the six months ended June 30, 2016, general and administrative costs were $3.3 million, the same as for 2015.

Other Operating Income

Other operating income in the three months ended June 30, 2016 was $0.1 million, the same as in the second quarter of 2015.

For the six months ended June 30, 2016, other operating income was $0.1 million, compared to $0.2 million in the comparative period. 

Adjusted EBITDA

As a result of the above, Adjusted EBITDA was $28.8 million for the three months ended June 30, 2016, up from $26.9 million for the three months ended June 30, 2015.

Adjusted EBITDA for the six months ended June 30, 2016 was $58.1 million, compared to $50.5 million for the comparative period.

Interest Expense

Debt at June 30, 2016 comprised amounts outstanding on our Notes, the revolving credit facility which was drawn March 11, 2015, and the secured term loan which was drawn September 10, 2015.

Interest expense for the three months ended June 30, 2016, was $11.1 million, down $0.7 million on the interest expense for the three months ended June 30, 2015 of $11.8 million.  The reduction is mainly due to reduced interest on our 10.0% Notes following the repurchase of $26.7 million principal amount of the Notes in March 2016, and the $0.5 million gain realized in May 2016 on the purchase in the open market of $4.2 million principal amount of the Notes, offset by interest on the secured term loan drawn in the third quarter of 2015 and higher amortization of the original issue discount on the Notes.  

For the six months ended June 30, 2016, interest expense was $24.2 million. For the six months ended June 30, 2015, interest expense was $23.7 million.  The increase is due to the effect of drawing on the secured term loan in September 2015, $0.5 million premium paid in March 2016 in relation to the tender offer which retired approximately $26.7 million of Notes, and accelerated write-off of the portion of the original issue discount attributable to the Notes which were purchased and retired, offset by lower interest on the Notes following the tender offer and the gain realized in May 2016 on the purchase of Notes in the open market.

Interest income for the three and six months ended June 30, 2016 and 2015 was not material.

Taxation

Taxation for the three months ended June 30, 2016 was $9,000, compared to $19,000 in the second quarter of 2015.

Taxation for the six months ended June 30, 2016 was $15,000, compared to $30,000 for the comparative period in 2015. 

Earnings Allocated to Preferred Shares

The Series B preferred shares, issued on August 20, 2014, carry a coupon of 8.75%, the cost of which for the three months ended June 30, 2016 was $0.8 million, the same as in the comparative period.  The cost was $1.5 million in the six months ended June 30, 2016, again the same as in the comparative period. 

Net Income Available to Common Shareholders

Net income available to common shareholders for the three months ended June 30, 2016, adjusting for the gain made on the purchase of Notes in May 2016, was $5.6 million, compared to $2.9 million in the second quarter 2015.

Net income available to common shareholders was $10.6 million for the six months ended June 30, 2016, compared to $2.9 million in the comparative period.  Normalized net income for the six months ended June 30, 2016, which excludes the gain on the purchase of Notes in May 2016 and charges associated with the tender offer for Notes completed in March 2016, was $11.1 million. Normalized net income for the six months ended June 30, 2015 was $2.9 million, the same as reported.

Fleet

The following table provides information about the on-the-water fleet of 18 vessels as at June 30, 2016. 15 vessels are chartered to CMA CGM, and three are chartered to OOCL.

        Remaining Earliest Daily
        Charter Charter Charter
Vessel Capacity Year Purchase Term (2) Expiry Rate
Name  in TEUs (1) Built by GSL  (years) Date $
CMA CGM Matisse 2,262 1999 Dec 2007 3.5 Sept 21, 2019 15,300
CMA CGM Utrillo 2,262 1999 Dec 2007 3.5 Sept 11, 2019 15,300
Delmas Keta 2,207 2003 Dec 2007 1.5 Sept 20, 2017 18,465
Julie Delmas 2,207 2002 Dec 2007 1.5 Sept 11, 2017 18,465
Kumasi 2,207 2002 Dec 2007 1.5 Sept 21, 2017 18,465
Marie Delmas 2,207 2002 Dec 2007 1.5 Sept 14, 2017 18,465
CMA CGM La Tour 2,272 2001 Dec 2007 3.5 Sept 20, 2019 15,300
CMA CGM Manet 2,272 2001 Dec 2007 3.5 Sept 7, 2019 15,300
CMA CGM Alcazar 5,089 2007 Jan 2008 4.5 Oct 18, 2020 33,750
CMA CGM Ch?teau d’If 5,089 2007 Jan 2008 4.5 Oct 11, 2020 33,750
CMA CGM Thalassa 11,040 2008 Dec 2008 9.5 Oct 1, 2025 47,200
CMA CGM Jamaica 4,298 2006 Dec 2008 6.5 Sept 17, 2022 25,350
CMA CGM Sambhar 4,045 2006 Dec 2008 6.5 Sept 16, 2022 25,350
CMA CGM America 4,045 2006 Dec 2008 6.5 Sept 19, 2022 25,350
CMA CGM Berlioz 6,621 2001 Aug 2009 5.2 May 28, 2021 34,000
OOCL Tianjin 8,063 2005 Oct 2014 1.5 Oct 28, 2017 34,500
OOCL Qingdao 8,063 2004 Mar 2015 1.8 Mar 11, 2018 34,500
OOCL Ningbo 8,063 2004 Sep 2015 2.3 Sep 17, 2018 34,500
           
 (1)  Twenty-foot Equivalent Units.          
(2)  As at June 30, 2016. Plus or minus 90 days, other than (i) OOCL Tianjin which is between October 28, 2017 and January 28, 2018, (ii) OOCL Qingdao which is between March 11, 2018 and June 11, 2018, and (iii) OOCL Ningbo which is between September 17, 2018 and December 17, 2018, all at charterer’s option.
 

 

About Global Ship Lease

Global Ship Lease is a containership charter owner. 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.

Global Ship Lease owns 18 vessels with a total capacity of 82,312 TEU and an average age, weighted by TEU capacity, at June 30, 2016 of 11.5 years. All 18 vessels are currently fixed on time charters, 15 of which are with CMA CGM. The average remaining term of the charters at June 30, 2016 is 4.0 years or 4.3 years on a weighted basis.

ADJUSTED EBITDA - UNAUDITED

(thousands of U.S. dollars)
    Three Three Six Six
    months months months months
    ended ended ended ended
    June 30, June 30, June 30, June 30,
      2016     2015     2016     2015  
           
Net income available to Common Shareholders   6,043     2,876     10,600     2,900  
           
Adjust: Depreciation   10,877     11,422     21,812     22,401  
  Interest income   (38 )   (13 )   (82 )   (27 )
  Interest expense   11,142     11,810     24,242     23,675  
  Income tax   9     19     15     30  
  Earnings allocated to preferred shares   765     765     1,531     1,531  
           
Adjusted EBITDA   28,798     26,879     58,118     50,510  
                         

B. Normalized net income

Normalized net income represents net income adjusted for the premium paid on the tender offer together with the related accelerated amortization of deferred financing costs and original issue discount. Normalized net income is a non-GAAP quantitative measure which we believe will assist investors and analysts who often adjust reported net income for non-operating 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.

NORMALIZED NET INCOME -  UNAUDITED
(thousands of U.S. dollars)
 
    Three Three Six Six
    months months months months
    ended ended ended ended
     June 30,   June 30,  June 30,  June 30, 
      2016   2015   2016   2015
                   
Net income available to Common Shareholders   6,043   2,876   10,600   2,900
           
Adjust: Gain on purchase of Notes   (452 ) ---   (452 ) ---
  Premium paid on tender offer for Notes   ---   ---   533   ---
  Accelerated write off of deferred financing charges related to purchase and tender offer   10   ---   90   ---
  Accelerated write off of original issue discount related to purchase and tender offer   31   ---   290   ---
           
Normalized net income   5,632   2,876   11,061   2,900
                 

                                     

 
Global Ship Lease, Inc.
Interim Unaudited Consolidated Statements of Income
(Expressed in thousands of U.S. dollars except share data)
 
    Three months ended June 30, Six months ended June 30,
      2016       2015       2016       2015  
           
           
Operating Revenues          
Time charter revenue   $   9,341     $   7,724     $   18,678     $   12,596  
Time charter revenue – related party     31,992       33,263       65,265       66,110  
      41,333       40,987       83,943       78,706  
                                 
Operating Expenses
Vessel operating expenses		     10,917       12,146       21,919       24,064  
Vessel operating expenses – related party     400       523       800       1,046  
Depreciation     10,877       11,422       21,812       22,401  
General and administrative     1,281       1,548       3,250       3,304  
Other operating income     (63 )     (109 )     (144 )     (218 )
                                 
Total operating expenses     23,412       25,530       47,637       50,597  
                                 
Operating Income     17,921       15,457       36,306       28,109  
           
Non Operating Income (Expense)          
Interest income     38       13       82       27  
Interest expense     (11,142 )     (11,810 )     (24,242 )     (23,675 )
                                 
Income before Income Taxes     6,817       3,660       12,146       4,461  
                                 
Income taxes     (9 )     (19 )     (15 )     (30 )
                                 
Net Income   $   6,808     $   3,641     $   12,131     $   4,431  
           
Earnings allocated to Series B Preferred Shares     (765 )     (765 )     (1,531 )     (1,531 )
                                 
Net Income available to Common Shareholders   $   6,043     $   2,876     $   10,600     $   2,900  
                                 
Earnings per Share          
           
Weighted average number of Class A common shares outstanding          
Basic (including RSUs without service conditions)     47,850,107       47,766,484       47,845,842       47,766,484  
Diluted     47,956,959       47,836,975       47,888,279       47,836,786  
                                 
Net income per Class A common share                                
Basic (including RSUs without service conditions)   $ 0.13     $ 0.06     $ 0.22     $ 0.06  
                                 
Diluted   $ 0.13      $ 0.06      $ 0.22      $   0.06   
                                 
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 income per Class B common share                                
Basic and diluted   $   0.00     $   0.00     $   0.00     $   0.00  
                                 

 

Global Ship Lease, Inc.
Interim Unaudited Consolidated Balance Sheets
(Expressed in thousands of U.S. dollars)
 
    June 30,
2016		   December 31,
2015
         
Assets        
                 
Cash and cash equivalents   $ 50,250     $ 53,591  
Accounts receivable     42       87  
Due from related party     2,347       2,124  
Prepaid expenses     1,727       1,101  
Other receivables     270       118  
Inventory     536       610  
                 
Total current assets     55,172       57,631  
                 
Vessels in operation     827,951       846,939  
Other fixed assets     5       5  
Intangible assets     25       39  
Other long term assets     252       306  
                 
Total non-current assets     828,233       847,289  
                 
Total Assets   $ 883,405     $ 904,920  
         
Liabilities and Stockholders’ Equity        
         
Liabilities        
                 
Current portion of long term debt     26,465       35,160  
Intangible liability – charter agreements     1,949       2,104  
Deferred revenue     588       796  
Accounts payable     1,638       622  
Due to related party     3,629       1,256  
Accrued expenses     12,224       13,694  
                 
Total current liabilities     46,493       53,632  
                 
Long term debt     418,730       442,913  
Intangible liability – charter agreements     10,685       11,589  
Deferred tax liability     15       20  
                 
Total long term liabilities     429,430       454,522  
         
Total Liabilities   $ 475,923     $ 508,154  
                 
Commitments and contingencies     -       -  
         
Stockholders’ Equity        
                 
Class A Common stock – authorized 214,000,000 shares with a $0.01 par value; 47,558,547 shares issued and outstanding (2015 – 47,541,484)   $ 476     $ 475  
Class B Common stock – authorized 20,000,000 shares with a $0.01 par value; 7,405,956 shares issued and outstanding (2015 – 7,405,956)     74       74  
Series B Preferred shares – authorized 16,100 shares with $0.01 par value; 14,000 shares issued and outstanding (2015 – 14,000)     -       -  
         
Additional paid in capital     386,540       386,425  
Retained earnings     20,392       9,792  
                 
Total Stockholders’ Equity     407,482       396,766  
                 
Total Liabilities and Stockholders’ Equity   $ 883,405     $ 904,920  
                 
 
Global Ship Lease, Inc.
Interim Unaudited Consolidated Statements of Cash Flows
(Expressed in thousands of U.S. dollars)
 
    Three months ended June 30, Six months ended June 30,
      2016       2015       2016       2015  
           
           
Cash Flows from Operating Activities          
Net income   $ 6,808     $ 3,641     $ 12,131     $ 4,431  
           
Adjustments to Reconcile Net income to Net Cash Provided by Operating Activities          
Depreciation     10,877       11,422       21,812       22,401  
Amortization of deferred financing costs     820       807       1,772       1,598  
Amortization of original issue discount     334       174       916       520  
Amortization of intangible liability     (530 )     (530 )     (1,059 )     (1,059 )
Share based compensation     82       25       115       50  
Gain on repurchase of secured notes     (452 )     -       (452 )     -  
Decrease (increase) in accounts receivable and other assets     151       (590 )     (398 )     848  
Decrease (increase) in inventory     40       4       74       (67 )
Increase (decrease) in accounts payable and other liabilities     8,896       11,674       (1,285 )     (1,557 )
(Decrease) increase in unearned revenue     (104 )     (79 )     (208 )     126  
Related party balances     347       (1,186 )     1,063       (37 )
Unrealized foreign exchange (gain) loss     (58 )     54       (28 )     32  
                                 
Net Cash Provided by Operating Activities     27,211       25,416       34,453       27,286  
                                 
Cash Flows from Investing Activities          
Cash paid for vessels     -       (170 )     -       (54,390 )
Cash paid in respect of sale of vessels     (97 )     -       (254 )     -  
Cash paid for other assets     -       -       (1 )     -  
Cash paid for drydockings     (948 )     (1,063 )     (948 )     (2,548 )
                                 
Net Cash Used in Investing Activities     (1,045 )     (1,233 )     (1,203 )     (56,938 )
                                 
Cash Flows from Financing Activities                                
Repurchase of secured notes     (3,748 )     (350 )     (30,410 )     (350 )
Proceeds from drawdown of revolving credit facility     -       -       -       40,000  
Deferred financing costs incurred     -       (370 )     -       (370 )
Repayment of credit facilities     (1,925 )     -       (4,650 )     -  
Series B Preferred Shares – dividends paid     (765 )     (765 )     (1,531 )     (1,531 )
                                 
Net Cash Used in Financing Activities     (6,438 )     (1,485 )     (36,591 )     37,749  
                                 
Net Increase (decrease) in Cash and Cash Equivalents     19,728       22,698       (3,341 )     8,097  
Cash and Cash Equivalents at Start of Period     30,522       18,694       53,591       33,295  
                                 
Cash and Cash Equivalents at End of Period   $ 50,250     $ 41,392     $ 50,250     $ 41,392  
                                 
Supplemental information                                
                                 
Total interest paid   $ 725     $ 130     $ 22,232     $ 21,130  
           
Income tax paid   $ 10     $ 19     $ 26     $ 36