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Seaspan Reports Financial Results for the Three and Nine Months Ended September 30, 2010

HONG KONG, CHINA - Oct. 27, 2010 /CNW/ - Seaspan Corporation (NYSE:SSW) announced today the financial results for the three and nine months ended September 30, 2010. Below is a summary of our key financial results.

Summary of Key Financial Results (dollars in thousands):
 



                                  Three Months Ended
                                      September 30,          Change
                                --------------------  --------------------
                                     2010       2009          $          %
                                ---------  ---------  ---------  ---------
Reported net loss               $ (70,879) $ (65,962) $  (4,917)      (7.5%)
Normalized net earnings(1)      $  26,125  $  20,232  $   5,893       29.1%
Loss per share, basic           $   (1.15) $   (1.03) $   (0.12)     (11.7%)
Loss per share, diluted         $   (1.15) $   (1.03) $   (0.12)     (11.7%)
Normalized earnings per share,
 converted(1)(i) (Series A
 preferred shares converted at
 $15)                           $    0.30  $    0.27  $    0.03       11.1%
Cash available for distribution
 to common shareholders(2)      $  51,743  $  38,635  $  13,108       33.9%



                                 Nine Months Ended
                                      September 30,          Change
                                --------------------  --------------------
                                     2010       2009          $          %
                                ---------  ---------  ---------  ---------
Reported net earnings (loss)   $ (229,337) $  70,562 $ (299,899)    (425.0%)
Normalized net earnings(1)     $   68,037  $  57,467 $   10,570       18.4%
Earnings (loss) per share,
 basic                         $    (3.67) $    0.93 $    (4.60)    (494.6%)
Earnings (loss) per share,
 diluted                       $    (3.67) $    0.90 $    (4.57)    (507.8%)
Normalized earnings per share,
 converted(1)(i) (preferred
 shares converted at $15)      $     0.81  $    0.78 $     0.03        3.8%
Cash available for distribution
 to common shareholders(2)     $  140,506  $ 112,437 $   28,069       25.0%


(i) Normalized earnings per share, converted, reflects normalized earnings
    per share on a pro-forma basis on the assumption that the Series A
    preferred shares are converted at $15.00 per share.  For a more
    detailed description of this calculation, please read "Reconciliation
    of Non-GAAP Financial Measures for the Three and Nine Months Ended
    September 30, 2010 - Description of Non-GAAP Financial Measures - B.
    Normalized Net Earnings and Normalized Earnings per Share".



Summary of Key Highlights:
 



--  Achieved vessel utilization of 98.7% and 98.3%, respectively, for the
    three and nine months ended September 30, 2010;


--  Accepted delivery of one newbuild vessel during the third quarter, the
    COSCO Indonesia, bringing our fleet to a total of 53 vessels at
    September 30, 2010;


--  Paid a second quarter dividend of $0.125 per share on August 20, 2010,
    reflecting a 25% increase over the dividend paid for the first quarter
    of 2010;


--  Declared a third quarter dividend of $0.125 per common share to be paid
    on November 12, 2010, increasing cumulative dividends declared since our
    IPO to $6.84 per common share; and


--  Subsequent to the quarter end, we also completed a corporate guarantee
    reduction and, subject to customary closing conditions, a $150 million
    sale-leaseback, which we believe, together, satisfy our remaining equity
    needs for the acquisition of the remaining vessels that we have
    contracted to acquire.



Gerry Wang, Chief Executive Officer of Seaspan, stated, "During the third quarter, Seaspan continued to grow earnings and cash flow, highlighting the Company's ongoing success in expanding its modern fleet and achieving strong utilization. Including the COSCO Indonesia, which we received in the third quarter, and the two newbuildings delivered in the current fourth quarter, Seaspan has taken delivery of a total of 13 vessels year-to-date. Going forward we expect the Company's annual cash available for distribution to grow approximately 65% over the next two years as we take delivery of 14 additional newbuildings over the next 18 months, all of which are secured on long-term charters with leading Asian-based liner companies."

Mr. Wang added, "During the quarter, Seaspan also maintained its focus on strengthening the Company's financial flexibility. Based on our most recent financing transactions, we believe we have fully secured funding for our built-in fleet growth in a manner that benefits the long-term interests of our shareholders. We are pleased to have successfully executed our plan, initiated in 2008, to finance our significant contracted fleet growth under favorable terms. Going forward, we remain committed to preserving Seaspan's strong capital structure and exploring growth opportunities that create enduring shareholder value."

Subsequent events:

Subsequent to the end of the third quarter, on October 15, 2010, we accepted delivery of an 8500 TEU vessel named the COSCO Thailand, and on October 25, 2010, we accepted delivery of a 4500 TEU vessel named the Brotonne Bridge bringing our fleet to 55 vessels.

On October 21, 2010, the Company entered into a twelve-year sale and leaseback financing for up to $150 million for one of its 13100 TEU container vessels ordered from Hyundai Heavy Industries Co., Ltd. Under the terms of the transaction, subject to certain closing conditions, the vessel will be sold by the Company upon delivery to an affiliate of Credit Agricole Corporate and Investment Bank and will charter the vessel to a newly formed, wholly owned subsidiary of Seaspan Corporation. The Company will charter the vessel from its subsidiary and continue to time charter the vessel to COSCO Container Lines Co., Ltd. in accordance with the terms of the original twelve-year time charter. The subsidiary's financial indebtedness under the charter is non-recourse to Seaspan Corporation.

On October 21, 2010, a subsidiary of Seaspan Corporation amended its $400 million UK Tax Lease Facility with an affiliate of Lloyds Banking Group. Under the original terms of the lease, all of the obligations of the Company's subsidiary under the lease were guaranteed by Seaspan Corporation. Under the terms of the amended lease facility, Seaspan Corporation's guarantee of scheduled rental and termination amounts, based on current tax and other assumptions, are limited to a significantly reduced fixed amount of the subsidiary's obligations. The lease facility will continue to provide the financing for five 4500 TEU vessels, each of which is to commence a twelve-year time charter with Kawasaki Kisen Kaisha Ltd. upon delivery.

Results for the Three and Nine Months Ended September 30, 2010:

The following tables summarize vessel utilization and the impact of off-hire time incurred on our revenues for the three and nine months ended September 30, 2010:
 



           First Quarter  Second Quarter    Third Quarter      Year to Date
         --------------- --------------- ---------------- -----------------
            2010    2009    2010    2009     2010    2009     2010     2009
         ------- ------- ------- ------- -------- ------- -------- --------
Vessel
 Utili-
 zation:
Ownership
 Days      3,908   3,150   4,390   3,445    4,871   3,632   13,169   10,227
Less Off-
 hire
 Days:
 Sched-
  uled 5-
  Year
  Survey     (20)      -     (42)      -     (52)     (14)    (114)     (14)
 Unsched-
  uled Off-
  hire       (91)     (1)     (4)     (4)    (10)      (6)    (105)     (11)
         ------- ------- ------- ------- -------- ------- -------- --------
Operating
 Days      3,797   3,149   4,344   3,441   4,809    3,612   12,950   10,202
         ------- ------- ------- ------- -------- ------- -------- --------
         ------- ------- ------- ------- -------- ------- -------- --------
Vessel
 Utili-
 zation     97.2%   99.9%   99.0%   99.9%   98.7%    99.4%    98.3%    99.8%
         ------- ------- ------- ------- -------- ------- -------- --------
         ------- ------- ------- ------- -------- ------- -------- --------



           First Quarter  Second Quarter    Third Quarter      Year to Date
         --------------- --------------- ---------------- -----------------
            2010    2009    2010    2009     2010    2009     2010     2009
         ------- ------- ------- ------- -------- ------- -------- --------
                                 Revenue (in thousands)
Revenue -
 Impact
 of Off-
 Hire:


100%
 Utili-
 zation  $82,378 $63,147 $98,360 $69,904 $112,473 $74,581 $293,211 $207,632
Less Off-
 hire:
 Sched-
  uled
  5-Year
  Survey    (347)      -    (738)      -     (914)   (427)  (1,999)    (427)
 Unsch-
  eduled
  Off-
  hire(3) (1,662)    (20)    (77)    (73)    (208)    (97)  (1,947)    (190)
         ------- ------- ------- ------- -------- ------- -------- --------
Actual
 Revenue
 Earned  $80,369 $63,127 $97,545 $69,831 $111,351 $74,057 $289,265 $207,015
         ------- ------- ------- ------- -------- ------- -------- --------
         ------- ------- ------- ------- -------- ------- -------- --------



We accepted delivery of seven vessels in the year ended December 31, 2009. We began 2010 with 42 vessels in operation and through September 30, 2010 accepted delivery of 11 vessels bringing our fleet to a total of 53 vessels in operation as at September 30, 2010. Operating days are the primary driver of revenue while ownership days are the primary driver for ship operating costs.
 



              Three Months Ended              Nine Months Ended
                   September  30,   Increase       September 30,   Increase
                ------- --------- ----- ---- --------- --------- ----- -----
                   2010      2009  Days    %      2010      2009  Days    %
                ------- --------- ----- ---- --------- --------- ----- -----
Operating days    4,809     3,612 1,197 33.1%   12,950    10,202 2,748 26.9%
Ownership days    4,871     3,632 1,239 34.1%   13,169    10,227 2,942 28.8%



Financial
 Summary       Three Months                 Nine Months
 (in                  Ended                       Ended
 millions)     September 30,       Change  September 30,            Change
             --------------- ------------- ------------- -------------------
                 2010   2009      $     %    2010   2009      $          %
             --------------- ------------- ------------- -------------------


Revenue       $ 111.4 $ 74.1 $ 37.3  50.4% $289.3 $207.0 $ 82.3       39.7%
Ship
 operating
 expense         29.2   20.7    8.6  41.5%   78.3   57.7   20.5       35.6%
Depreciation     26.9   18.0    8.9  49.5%   71.3   51.0   20.3       39.9%
General and
 administrative
 expenses         2.6    2.0    0.6  29.8%    6.9    6.1    0.8       13.7%
Interest
 expense          8.3    5.1    3.2  62.5%   20.3   15.8    4.5       28.3%
Change in
 fair value
 of financial
 instruments    113.4   92.6   20.8  22.5%  336.5    0.1  336.5  442,725.0%
Other
 expenses           -      -      -   0.0%      -    1.1   (1.1)      (100%)



Revenue

The increase in operating days, and the dollar impact thereof, for the three and nine months ended was due to the following:
 



                                  Three Months Ended     Nine Months Ended
                                  September 30, 2010    September 30, 2010
                                --------------------  --------------------
                                Operating   $ impact  Operating   $ impact
                                     Days        (in       Days        (in
                                   impact   millions)    impact   millions)
                                ---------  ---------  ---------  ---------
2010 vessel deliveries              1,007  $    32.1      1,703  $    54.7
Full period contribution for
 2009 vessel deliveries               232        5.8      1,239       30.9
Scheduled off-hire                    (38)      (0.5)      (101)      (1.5)
Unscheduled off-hire                   (4)      (0.1)       (93)      (1.8)
                                ---------  ---------  ---------  ---------
Total                               1,197  $    37.3      2,748  $    82.3
                                ---------  ---------  ---------  ---------
                                ---------  ---------  ---------  ---------



Vessel utilization was 98.7% and 98.3%, respectively, for the three and nine months ended September 30, 2010 compared to 99.4% and 99.8%, for the comparable periods in the prior year.

This decrease in vessel utilization for the nine months ended September 30, 2010 was primarily due to the 90 days of unscheduled off-hire resulting from the grounding of the CSCL Hamburg in the Gulf of Aqaba on December 31, 2009. CSCL Hamburg's next dry-docking was originally scheduled for 2013, however we combined the repairs of the CSCL Hamburg with an earlier dry-docking which defers the next scheduled dry-docking to 2015. This dry-docking resulted in 12 days of scheduled off-hire and the CSCL Hamburg was back in service in April. We also completed the dry-dockings for the CSCL Vancouver, CSCL Sydney, CSCL New York, CSCL Melbourne, New Delhi Express, CSCL Brisbane and are in progress of completing the dry-docking for Dubai Express. This has resulted in a total of 114 days of scheduled off-hire. Our vessel utilization since our initial public offering is 99.1%.

Ship Operating Expense

The increase in ownership days, and the dollar impact thereof, for the three and nine months ended September 30, 2010 was due to the following:
 



                                  Three Months Ended     Nine Months Ended
                                  September 30, 2010    September 30, 2010
                                --------------------  --------------------
                                Ownership   $ impact  Ownership   $ impact
                                     Days        (in       Days        (in
                                   impact   millions)    impact   millions)
                                ---------  ---------  ---------  ---------
2010 vessel deliveries              1,007  $     6.2      1,703  $    10.6
Full period contribution for
 2009 vessel deliveries               232        1.3      1,239        7.0
Changes in extraordinary(4)
 costs & expenses not covered by
 the fixed fee                          -        1.1          -        2.9
                                ---------  ---------  ---------  ---------
Total                               1,239  $     8.6      2,942  $    20.5
                                ---------  ---------  ---------  ---------
                                ---------  ---------  ---------  ---------



Depreciation

The increase in depreciation expense was due to the additional ownership days from the 11 deliveries in 2010 and a full period for the seven deliveries in 2009.

General and Administrative Expenses

The increase in general and administrative expenses was primarily due to an increase in non-cash share based compensation resulting from higher share prices at the awards' grant dates and increased costs to support growth.

Interest Expense

Interest expense is composed of interest at the variable rate plus margin incurred on debt for operating vessels and a reclassification of amounts from accumulated other comprehensive income related to previously designated hedging relationships. The increase in interest expense for the three and nine months ended September 30, 2010, was primarily due to a higher average operating debt balance compared to the comparable periods in the prior year. The average LIBOR for the quarter ended September 30, 2010 was 0.3% which is consistent with the comparable period in the prior year. The average LIBOR for the nine months ended September 30, 2010 was 0.3%, compared to 0.5% for the comparable period in the prior year. Although we have entered into fixed interest rate swaps, the difference between the variable interest rate and the swapped fixed rate on operating debt is recorded in our change in fair value of financial instruments caption as required by financial reporting standards. The interest incurred on our long-term debt for our vessels under construction is capitalized to the respective vessels under construction.

Change in Fair Value of Financial Instruments

The change in fair value of financial instruments resulted in a loss of $113.4 million for the three months ended September 30, 2010 compared to a loss of $92.6 million for the comparable quarter last year. The change in fair value of financial instruments resulted in a loss of $336.5 million for the nine months ended September 30, 2010 compared to a loss of $0.1 million for the comparable period last year. The change in fair value loss for the three and nine months ended September 30, 2010 was primarily due to decreases in the forward LIBOR curve.

Cash Available for Distribution to Common Shareholders(2)

These increases in cash available for distribution for the three and nine months ended September 30, 2010 over the comparable periods in the prior year are primarily due to an increased fleet size of 53 vessels at September 30, 2010 compared to 41 vessels at September 30, 2009.

Dividend Declared:

For the quarter ended September 30, 2010, we declared a quarterly dividend of $0.125 per common share, representing a total distribution of $8.5 million. The dividend will be paid on November 12, 2010 to all shareholders of record as of November 2, 2010. Because we adopted a dividend reinvestment plan, or DRIP, the actual amount of cash dividends paid may be less than the $8.5 million based on shareholder participation in the DRIP.

Since our initial public offering in August 2005, we have declared cumulative dividends of $6.84 per common share. Cumulatively, since we adopted the DRIP in May 2008, an additional 1.8 million shares have been issued through the participation in the DRIP. As of today's date and based on a discount of 3%, participating shareholders have invested $18.4 million in the DRIP since the plan's adoption.

About Seaspan

Seaspan owns containerships and charters them pursuant to primarily long-term fixed-rate charters. Seaspan's contracted fleet of 69 containerships consists of 55 containerships in operation and 14 containerships to be delivered over approximately the next 18 months. Seaspan's operating fleet of 55 vessels has an average age of approximately four years and an average remaining charter period of approximately seven years. All of the 14 vessels to be delivered to Seaspan are already committed to primarily long-term time charters averaging approximately 12 years in duration from delivery. Seaspan's customer base consists of eight of the world's largest liner companies, including to A.P. Moller-Maersk A/S, China Shipping Container Lines (Asia) Co., Ltd., Compania Sud Americana de Vapores, COSCO Container Lines Co., Ltd., Hapag-Lloyd USA, LLC, Kawasaki Kisen Kaisha Ltd., Mitsui O.S.K. Lines, Ltd., and United Arab Shipping Company (S.A.G).

Seaspan's common shares are listed on the New York Stock Exchange under the symbol "SSW".

Conference Call and Webcast

Seaspan will host a conference call and webcast presentation for investors and analysts to discuss its results for the three and nine months ended September 30, 2010 on Wednesday October 27, 2010 at 7:00 a.m. PT / 10:00 a.m. ET. Participants should call 1-877-246-9875 (US/Canada) or 1-707-287-9353 (International) and request the Seaspan call. A telephonic replay will be available for anyone unable to participate in the live call. To access the replay, call 1-800-642-1687 or 1-706-645-9291 and enter the replay passcode: 17734764. The recording will be available from October 27, 2010 at 10:00 a.m. PT / 1:00 p.m. ET through to 8:59 p.m. PT / 11:59 p.m. ET on November 10, 2010. The conference call will also be broadcast live over the Internet and will include a slide presentation. To access the live webcast and slide presentation, go to www.seaspancorp.comand click on "News & Events" then "Events & Presentations" for the link. The webcast and slides will be archived on the site for one year.
 



SEASPAN CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2010
(IN THOUSANDS OF US DOLLARS)


                                     September 30, 2010   December 31, 2009
                                     ------------------   -----------------
Assets
Current assets:
 Cash and cash equivalents                    $ 146,709           $ 133,400
 Accounts receivable                                993                 164
 Prepaid expenses                                10,873              12,489
                                     ------------------   -----------------
                                                158,575             146,053


Vessels                                       2,996,083           2,088,689
Vessels under construction                    1,086,798           1,396,661
Deferred charges                                 29,931              21,667
Other assets                                     18,177              11,377
                                     ------------------   -----------------
                                            $ 4,289,564         $ 3,664,447
                                     ------------------   -----------------
                                     ------------------   -----------------


Liabilities and Shareholders' Equity
Current liabilities:
 Accounts payable and accrued liabilities      $ 23,579            $ 20,905
 Deferred revenue                                 4,729               9,787
 Current portion of other long-term
  liabilities                                    18,657                   -
                                     ------------------   -----------------
                                                 46,965              30,692


Long-term debt (operating vessels)            1,787,639             936,794
Long-term debt (vessels under construction)     582,807             946,352
Other long-term liabilities                     488,593             410,598
Fair value of financial instruments             532,907             280,445
                                     ------------------   -----------------
                                              3,438,911           2,604,881


Share capital                                       689                 679
Additional paid-in capital                    1,523,623           1,489,936
Deficit                                        (602,055)           (349,802)
Accumulated other comprehensive loss            (71,604)            (81,247)
                                     ------------------   -----------------
Total shareholders' equity                      850,653           1,059,566


                                     ------------------   -----------------
                                            $ 4,289,564         $ 3,664,447
                                     ------------------   -----------------
                                     ------------------   -----------------



SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE AMOUNTS)


                                    Three      Three       Nine       Nine
                                   months     months     months     months
                                    ended      ended      ended      ended
                                September  September  September  September
                                 30, 2010   30, 2009   30, 2010   30, 2009
                                ---------  ---------  ---------  ---------


Revenue                         $ 111,351  $  74,057  $ 289,265  $ 207,015


Operating expenses:
 Ship operating                    29,229     20,659     78,269     57,730
 Depreciation                      26,929     18,017     71,302     50,969
 General and administrative         2,577      1,985      6,885      6,058
                                ---------  ---------  ---------  ---------
                                   58,735     40,661    156,456    114,757
                                ---------  ---------  ---------  ---------


Operating earnings                 52,616     33,396    132,809     92,258


Other expenses (earnings):
 Interest expense                   8,293      5,104     20,272     15,802
 Interest income                       (5)       (21)       (41)      (270)
 Undrawn credit facility fees       1,011      1,156      3,072      3,512
 Amortization of deferred
  charges                             808        543      2,296      1,476
 Change in fair value of
  financial instruments           113,388     92,576    336,547         76
 Other expenses                         -          -          -      1,100
                                ---------  ---------  ---------  ---------
                                  123,495     99,358    362,146     21,696
                                ---------  ---------  ---------  ---------


Net earnings (loss)               (70,879)   (65,962)  (229,337)    70,562


Deficit, beginning of period     (522,061)  (345,041)  (349,802)  (443,081)
Dividends on common shares         (8,522)    (6,733)   (22,105)   (45,217)
Dividends on series B preferred
 shares                              (593)         -       (811)         -
                                ---------  ---------  ---------  ---------
Deficit, end of period           (602,055)  (417,736)  (602,055)  (417,736)
                                ---------  ---------  ---------  ---------
                                ---------  ---------  ---------  ---------


Weighted average number of
 shares, basic                     68,270     67,436     68,099     67,238
Weighted average number of
 shares, diluted                   68,270     67,436     68,099     78,511


Earnings (loss) per share,
 basic                          $   (1.15) $   (1.03) $   (3.67) $    0.93
                                ---------  ---------  ---------  ---------
                                ---------  ---------  ---------  ---------
Earnings (loss) per share,
 diluted                        $   (1.15) $   (1.03) $   (3.67) $    0.90
                                ---------  ---------  ---------  ---------
                                ---------  ---------  ---------  ---------



SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(IN THOUSANDS OF US DOLLARS)


                                    Three      Three       Nine       Nine
                                   months     months     months     months
                                    ended      ended      ended      ended
                                September  September  September  September
                                 30, 2010   30, 2009   30, 2010   30, 2009
                                ---------  ---------  ---------  ---------


Net earnings (loss)             $ (70,879) $ (65,962) $(229,337) $  70,562


Other comprehensive income:
 Amounts reclassified to
 earnings (loss) during the
 period                             3,601      2,952      9,643      8,992
                                ---------  ---------  ---------  ---------


Comprehensive income (loss)     $ (62,278) $ (63,010) $(219,694) $  79,554
                                ---------  ---------  ---------  ---------
                                ---------  ---------  ---------  ---------



SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(IN THOUSANDS OF US DOLLARS)


                     Three months  Three months   Nine months   Nine months
                            ended         ended         ended         ended
                     September 30, September 30, September 30, September 30,
                             2010          2009          2010          2009
                     ------------  ------------  ------------  ------------
Cash provided by
 (used in):


Operating activities:
 Net earnings (loss)   $  (70,879)   $  (65,962)   $ (229,337)   $   70,562
 Items not involving
  cash:
  Depreciation             26,929        18,017        71,302        50,969
  Share-based
   compensation               706           559         1,980         1,583
  Amortization of
   deferred charges           808           543         2,296         1,476
  Amounts
   reclassified from
   other comprehensive
   loss                     3,520         2,925         9,444         8,930
  Unrealized change
   in fair value of
   financial
   instruments             84,903        68,975       252,462       (62,668)
Change in assets and
 liabilities               (5,980)         (293)      (10,474)       (6,072)
                     ------------  ------------  ------------  ------------
Cash provided by
 operating activities      40,007        24,764        97,673        64,780
                     ------------  ------------  ------------  ------------


Financing activities:
 Preferred shares
  issued, net of
  share issue costs           (15)          (57)       25,880        98,785
 Preferred shares
  subscribed                    -        80,000             -        80,000
 Draws on credit
  facilities              124,820        59,581       487,300       103,142
 Other long-term
  liabilities                   -             -        21,250             -
 Financing fees              (237)            -        (3,314)       (3,372)
 Dividends on
  common shares(ii)        (6,324)       (5,371)      (16,630)      (39,688)
 Dividends on series
  B preferred shares         (328)            -          (449)            -
                     ------------  ------------  ------------  ------------
Cash provided by
 financing activities     117,916       134,153       514,037       238,867
                     ------------  ------------  ------------  ------------


Investing activities:
 Expenditures for
  vessels                 (17,446)     (117,157)     (592,071)     (334,972)
 Restricted cash                -             -        (5,000)            -
 Intangible assets           (156)         (248)       (1,330)         (931)
                     ------------  ------------  ------------  ------------
Cash used in
 investing activities     (17,602)     (117,405)     (598,401)     (335,903)
                     ------------  ------------  ------------  ------------


Increase (decrease)
 in cash and cash
 equivalents              140,321        41,512        13,309       (32,256)


Cash and cash
 equivalents,
 beginning of period        6,388        62,517       133,400       136,285
                     ------------  ------------  ------------  ------------
Cash and cash
 equivalents, end
 of period              $ 146,709     $ 104,029     $ 146,709     $ 104,029
                     ------------  ------------  ------------  ------------
                     ------------  ------------  ------------  ------------


(ii) During the three and nine months ended September 30, 2010, non-cash
     dividends of $2.2 million and $5.5 million, respectively, were paid
     through the dividend reinvestment program. Shareholders have invested
     $18.4 million in the dividend reinvestment program since its adoption
     in May 2008.



SEASPAN CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

(IN THOUSANDS OF US DOLLARS)

Description of Non-GAAP Financial Measures

A. Cash Available for Distribution to Common Shareholders

Cash available for distribution to common shareholders is defined as net earnings adjusted for depreciation, amortization of deferred charges, non-cash undrawn credit facility fees, write-off of deferred financing fees on debt refinancing, non-cash share-based compensation, amounts paid for dry-docking, non-cash interest income, change in fair value of financial instruments, interest expense(5), cash interest paid at the hedged rate(7), cash dividends paid on preferred shares and certain other items that the Company believes affect the comparability of its operating results. Cash available for distribution to common shareholders is a non-GAAP measure used to assist in evaluating the Company's ability to make quarterly cash dividends before reserves. Cash available for distribution to common shareholders is not defined by GAAP and should not be considered as an alternative to net earnings or any other indicator of Seaspan's performance required to be reported by GAAP.
 



                     Three months  Three months   Nine months   Nine months
                            ended         ended         ended         ended
                     September 30, September 30, September 30, September 30,
                             2010          2009          2010          2009
                     ------------  ------------  ------------  ------------


Net earnings (loss)    $  (70,879)   $  (65,962)   $ (229,337)   $   70,562
Add:
 Depreciation              26,929        18,017        71,302        50,969
 Interest expense(5)        8,293         5,104        20,272        15,802
 Amortization of
  deferred charges            808           543         2,296         1,476
 Undrawn credit
  facility fees             1,011         1,156         3,072         3,512
 Share-based
  compensation                706           559         1,980         1,583
 Change in fair
  value of financial
  instruments             113,388        92,576       336,547            76
 Other expenses                 -             -             -         1,100
Less:
 Amounts paid for
  dry-dock                 (2,064)         (903)       (4,894)       (2,580)
 Interest income               (5)          (21)          (41)         (270)
 Series B preferred
  share dividends
  paid(6)                    (328)            -          (449)            -
                     ------------  ------------  ------------  ------------
 Net cash flows
  before cash
  interest payments        77,859        51,069       200,748       142,230
Less:
 Cash interest paid
  at the hedged
  rate(7)                 (25,562)      (11,961)      (58,482)      (28,367)
 Cash paid for
  undrawn credit
  facility fees              (559)         (498)       (1,801)       (1,696)
Add:
 Cash interest
  received                      5            25            41           270
                     ------------  ------------  ------------  ------------
Cash available for
 distribution to
 common shareholders   $   51,743    $   38,635    $  140,506    $  112,437
                     ------------  ------------  ------------  ------------
                     ------------  ------------  ------------  ------------



SEASPAN CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE AMOUNTS)

Description of Non-GAAP Financial Measures

B. Normalized Net Earnings and Normalized Earnings per Share

Normalized net earnings is defined as net earnings adjusted for items such as the change in fair value of financial instruments, write-off of deferred financing fees on debt refinancing, interest expense(5) and interest expense at the hedged rate(8) and certain other items the Company believes affect the comparability of operating results. With these adjustments, normalized net earnings reflects interest expense on our operating debt at the fixed rate on our interest rate swaps plus the applicable margin on the related credit facilities. Normalized net earnings is useful because it excludes the change in fair value of financial instruments that affects the comparability of the Company's operating results and includes interest at the hedged rate, which includes the effect of the interest rate swaps on our operating debt.

Normalized net earnings is not defined by GAAP and should not be considered as an alternative to net earnings or any other indicator of Seaspan's performance required to be reported by GAAP.

Normalized earnings per share, converted, is calculated as normalized net earnings, less dividends on Series B preferred shares, divided by the "converted" number of shares outstanding for the period. The Series A preferred shares automatically convert to Class A common shares at a price of $15.00 per share at any time on or after January 31, 2014 if the trailing 30-day average trading price of the common shares is equal to or above $15.00. If the share price is less than $15.00, the Company can choose to not convert the preferred shares and to increase the annual increase in the liquidation preference to 15% per annum from 12%. The "converted" number of shares includes: basic weighted average number of shares, share-based compensation, and the impact of the Series A preferred shares converted at $15.00 per share. This method is reflective of the Company's ability to control the conversion if the share price is less than $15.00 and the per share impact of the preferred shares conversion at $15.00.

Normalized earnings per share, basic can be computed as normalized net earnings attributable to common shareholders divided by the weighted average number of shares used to compute reported earnings per share, basic.

Normalized earnings per share, diluted can be computed as the lower of: (1) normalized net earnings less dividends on Series B preferred shares divided by the weighted average number of shares used to compute reported earnings per share, diluted and (2) normalized earnings per share, basic.

Normalized earnings per share, converted, diluted, and basic are not defined by GAAP and should not be considered as an alternative to earnings per share or any other indicator of Seaspan's performance required to be reported by GAAP.
 



                     Three months  Three months   Nine months   Nine months
                            ended         ended         ended         ended
                     September 30, September 30, September 30, September 30,
                             2010          2009          2010          2009
                     ------------  ------------  ------------  ------------
Net earnings (loss)    $  (70,879)   $  (65,962)   $ (229,337)   $   70,562
Adjust:
 Change in fair
  value of financial
  instruments             113,388        92,576       336,547            76
 Interest expense(5)        8,293         5,104        20,272        15,802
 Interest expense at
  the hedged rate(8)      (24,677)      (11,486)      (59,445)      (28,973)
                     ------------  ------------  ------------  ------------
Normalized net
 earnings              $   26,125    $   20,232    $   68,037    $   57,467
                     ------------  ------------  ------------  ------------


Less: preferred
 share dividends
 Series A                   6,879         3,177        19,831         8,200
 Series B                     593             -           811             -
                     ------------  ------------  ------------  ------------
                            7,472         3,177        20,642         8,200
                     ------------  ------------  ------------  ------------


Normalized net
 earnings
 attributable to
 common
 shareholders          $   18,653    $   17,055    $   47,395    $   49,267
                     ------------  ------------  ------------  ------------
                     ------------  ------------  ------------  ------------


Weighted average
 number of shares
 used to compute
 earnings (loss)
 per share:


Reported, basic            68,270        67,436        68,099        67,238


 Share-based
  compensation                140             -            89            25


 Preferred shares
  liquidation
  preference
  converted at $15         15,390         7,002        14,947         6,667
                     ------------  ------------  ------------  ------------
Normalized, converted      83,800        74,438        83,135        73,930


 Preferred shares
  115% premium
  (30-day trailing
  average)                  5,476         9,669         6,712         4,581
                     ------------  ------------  ------------  ------------
Reported, diluted
 (Note 1)                  89,276        84,107        89,847        78,511
                     ------------  ------------  ------------  ------------
Earnings (loss) per
 share:
 Reported, basic       $    (1.15)   $    (1.03)   $    (3.67)   $     0.93
                     ------------  ------------  ------------  ------------
                     ------------  ------------  ------------  ------------
 Reported, diluted     $    (1.15)   $    (1.03)   $    (3.67)   $     0.90
                     ------------  ------------  ------------  ------------
                     ------------  ------------  ------------  ------------
 Normalized,
  converted-preferred
  shares converted
  at $15               $     0.30    $     0.27    $     0.81    $     0.78
                     ------------  ------------  ------------  ------------
                     ------------  ------------  ------------  ------------


Note 1: If the effect of Series A preferred shares is anti-dilutive, their
        effect is excluded from the computation of reported diluted earnings
       (loss) per share.


(1) Normalized net earnings and normalized earnings per share are non-GAAP
    measures that are adjusted for items such as the change in fair value of
    financial instruments, write-off of deferred financing fees on debt
    refinancing, interest expense and interest expense at the hedged rate.
    Please read "Reconciliation of Non-GAAP Financial Measures for the Three
    and Nine Months Ended September 30, 2010 - Description of Non-GAAP
    Financial Measures - B. Normalized Net Earnings and Normalized Earnings
    per Share" for a description of normalized net earnings and a
    reconciliation of net earnings to normalized net earnings.


(2) Cash available for distribution to common shareholders is a non-GAAP
    measure that represents net earnings adjusted for depreciation,
    amortization of deferred charges, non-cash undrawn credit facility fees,
    write-off of deferred financing fees on debt refinancing, non-cash
    share-based compensation, dry-dock adjustment, non-cash interest income,
    change in fair value of financial instruments, interest expense, cash
    interest paid at the hedged rate and other items that the Company
    believes are not representative of its operating performance. Please
    read "Reconciliation of Non-GAAP Financial Measures for the Three and
    Nine Months Ended September 30, 2010 - Description of Non-GAAP Financial
    Measures - A. Cash Available for Distribution to Common Shareholders"
    for a description of cash available for distribution to common
    shareholders and a reconciliation of cash available for distribution to
    net earnings.


(3) Includes charterer deductions that are not related to off-hire.


(4) Extraordinary costs and expenses are defined in our management
    agreements and do not relate to extraordinary items as defined by
    financial reporting standards.


(5) Interest expense as reported on the consolidated statement of
    operations.


(6) Dividends paid in cash on the Series B Preferred Shares have been
    deducted as they reduce cash available for distribution to common
    shareholders.


(7) Cash interest paid at the hedged rate is calculated as the interest
    incurred on operating debt at the fixed rate on the related interest
    rate swaps plus the applicable margin on the related credit facilities,
    on a cash basis.


(8) Interest expense at the hedged rate is calculated as the interest
    incurred on operating debt at the fixed rate on the related interest
    rate swaps plus the applicable margin on the related credit facilities,
    on an accrual basis.



STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This release contains certain forward-looking statements (as such term is defined in Section 21E of the Securities Exchange Act of 1934, as amended) concerning future events and our operations, performance and financial condition, including, in particular, the likelihood of our success in developing and expanding our business, and our equity capital requirements. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects", "anticipates", "intends", "plans", "believes", "estimates", "projects", "forecasts", "will", "may", "potential", "should", and similar expressions are forward-looking statements. These forward-looking statements reflect management's current views only as of the date of this presentation and are not intended to give any assurance as to future results. As a result, you are cautioned not to rely on any forward-looking statements. Forward-looking statements appear in a number of places in this release. Although these statements are based upon assumptions we believe to be reasonable based upon available information, including operating margins, earnings, cash flow, working capital and capital expenditures, they are subject to risks and uncertainties.

These risks and uncertainties include, but are not limited to: future operating or financial results; our expectations relating to dividend payments and our ability to make such payments; pending acquisitions, business strategy and expected capital spending; operating expenses, availability of crew, number of off-hire days, dry-docking requirements and insurance costs; general market conditions and shipping market trends, including charter rates and factors affecting supply and demand; our financial condition and liquidity, including our ability to borrow funds under our credit facilities and to obtain additional financing in the future to fund capital expenditures, acquisitions and other general corporate activities; estimated future capital expenditures needed to preserve our capital base; our expectations about the availability of ships to purchase, the time that it may take to construct new ships, or the useful lives of our ships; our continued ability to enter into primarily long-term, fixed-rate time charters with our customers; our ability to leverage to our advantage Seaspan Management Services Limited's relationships and reputation in the containership industry; changes in governmental rules and regulations or actions taken by regulatory authorities; the financial condition of our shipyards, charterers, lenders, refund guarantors and other counterparties and their ability to perform their obligations under their agreements with us; changes in worldwide container demand; changes in trading patterns; competitive factors in the markets in which we operate; potential inability to implement our growth strategy; potential for early termination of long-term contracts and our potential inability to renew or replace long-term contracts; ability of our customers to make charter payments; potential liability from future litigation; conditions in the public equity markets; and other factors detailed from time to time in our periodic reports and our filings with the Securities and Exchange Commission. We expressly disclaim any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in our views or expectations, or otherwise. We make no prediction or statement about the performance of our common shares.

For further information: For Investor Relations Inquiries: Seaspan Corporation, Mr. Sai W. Chu, Chief Financial Officer, 604-638-2575 / For Media Inquiries: The IGB Group, Mr. Leon Berman, 212-477-8438