Global Ship Lease, Inc (NYSE: GSL)(NYSE: GSL.U)(NYSE: GSL.WS), a
rapidly growing containership charter owner, announced today its
unaudited results for the three months ended December 31, 2008.
Fourth Quarter 2008 and Year-to-Date 2009 Highlights
- Paid a starting dividend of $0.23 per share on October 14,
2008 to all Class A common shareholders and unit holders of record
as of October 2, 2008
- Paid a third quarter dividend of $0.23 per share on November
28, 2008 to Class A common shareholders and unit holders of record
as of November 21, 2008
- Declared a fourth quarter dividend of $0.23 per share payable
on March 5, 2009 to Class A common shareholders and unit holders
and Class B common shareholders of record as of February 20,
2009
- Generated $12.8 million cash available for common dividends in
the fourth quarter of 2008
- Reported revenue of $26.3 million for the fourth quarter of
2008
- Reported normalized net earnings of $7.0 million, or $0.21 per
share, for the fourth quarter of 2008, excluding a $50.7 million
non-cash interest rate derivative mark-to-market charge
- Including non-cash charges, reported net loss of $43.7 million
for the fourth quarter of 2008
- Took delivery of four containerships in December 2008 ranging
in size from 4,045 to 10,960 TEU and with charters in place for 14
to 17 years, as planned. The company drew $256 million under its
credit facility to pay for the four vessels
- Expanded management team with appointment of Vivek Puri to
Chief Technical Officer in November 2008
- Favorably amended $800 million credit facility to improve
financial flexibility in February 2009
Ian Webber, Chief Executive Officer of Global Ship Lease,
stated, "Global Ship Lease's fully time chartered fleet was once
again the main driver of the company's strong revenues and
predictable cash flows in this challenging economic environment.
During the fourth quarter, we took delivery of four additional
vessels and commenced long-term time charters for each, expanding
our modern fleet to 16 vessels and increasing our contracted
revenue stream to $1.5 billion. Our entire operating fleet is now
secured on contracts with an average remaining term of
approximately 10 years, all of which continue to perform as
expected. Complementing our disciplined time charter approach which
generates predictable and stable cash flows, we worked closely with
our ship manager to maintain cost controls during a period when
crew and lubricating oil expenses have been increasing."
Mr. Webber continued, "In addition, as we entered into 2009 we
took decisive actions to reduce our risk with respect to our loan
to value maintenance covenant under the Company's credit facility.
Specifically, we worked closely with our lenders to favorably amend
our credit facility with modest upfront cost. Our proactive
approach enabled us to significantly reduce our exposure to
pressures on ship valuations and enhances Global Ship Lease's
ability to continue providing shareholders with attractive
dividends."
Results for Three Months Ended December 31, 2008
Comparative financial information for 2007 is not included
herein because under predecessor accounting this information
pertains primarily to operations of the vessels when they were
owned by CMA CGM, a privately owned French container shipping
company, and operated in CMA CGM's business of earning revenue from
carrying cargo. Global Ship Lease commenced its business of time
chartering out vessels in December 2007. The two business models
are not comparable.
Financial information relating to the year ended December 31,
2008 is also not included due to the significant changes arising
from the merger on August 14, 2008, including a change in legal
entity. The unaudited interim combined financial statements
included in this press release reflect the periods before and after
the merger on August 14, 2008, as a result of which the capital
structure changed significantly and the company became listed on
the New York Stock Exchange.
Revenue for the three months ended December 31, 2008, as
reported in our unaudited interim combined financial statements,
was $26.3 million for the Successor (post-merger for the three
months ended December 31, 2008). Normalized net earnings were $7.0
million after adjusting for a non cash mark-to-market charge of
$50.7 million on our interest rate derivatives. The reported net
loss was $43.7 million.
(U.S. Dollars thousand except per share data) Three
Months ended
December 31,
2008
--------------------------------------------------------------------------
Revenue 26,305
Operating Income 9,875
Net loss (43,655)
Normalized net earnings(1) 7,020
Normalized earnings per share(1) 0.21
Cash available for distribution(1) 12,777
(1) Normalized net earnings, normalized earnings per share, and cash
available for distribution are non-US Generally Accepted Accounting
Principles (US GAAP) measures, as explained further in this release and
a reconciliation is provided to the interim unaudited financial
statements.
Revenue and Utilization
Global Ship Lease owned twelve vessels at the beginning of the
fourth quarter and took delivery of four additional vessels during
December. The fleet generated revenue from fixed rate long-term
time charters of $26.3 million in the three months ended December
31, 2008. During this period, there were no off-hire days
representing utilization of 100%. There were 4,416 ownership days
in the year ended December 31, 2008 with 15 planned off-hire days
for a scheduled dry-docking in the First Quarter and 30 unplanned
days, representing utilization of 99%.
Vessel Operating Expenses
Vessel operating expenses, which include costs of crew,
lubricating oil, spares and insurance, were $7.9 million for the
three months ended December 31, 2008, an average of $6,873 per
ownership day, down 4% on the average cost for the previous
quarter. Vessel operating expenses include regular ship operating
costs under Global Ship Lease's ship management agreements and are
at less than the capped amounts included in these agreements.
Depreciation
Depreciation was $5.9 million for the three months ended
December 31, 2008, including the effect of the purchase during
December of four additional vessels.
General and Administrative Costs
General and administrative costs incurred were $2.7 million in
the fourth quarter of 2008, which was our first full quarter as an
independent public company.
Interest Expense
Interest expense for the three months ended December 31, 2008
was $2.6 million based on the company's indebtedness of $286.1
million through the quarter until the purchase of the four vessels
in December, which led to additional drawings under the credit
facility of $256.0 million, bringing total drawings to $542.1
million.
Change in Fair Value of Financial Instruments
The company hedges the majority of its interest rate exposure by
entering into derivatives that swap floating rate debt to fixed
rate debt to provide long-term stability and predictability to cash
flows. As these hedges do not qualify for hedge accounting under US
GAAP, the outstanding hedges are marked to market each period end
with any change in the fair value being booked to the income and
expenditure account. The change in the fair value gave a $50.7
million loss in the three months ended December 31, 2008 reflecting
the decline in LIBOR and movements in the forward curve for
interest rates. Mark-to-market adjustments have no impact on
operating performance or cash generation and do not affect the
company's ability to make distributions to shareholders.
Net Earnings
Normalized net earnings were $7.0 million, or $0.21 per share,
for the quarter ended December 31, 2008 excluding a $50.7 million
non-cash interest rate derivative mark-to-market charge.
Including non-cash charges, the company reported a net loss of
$43.7 million for the quarter.
Normalized net earnings and normalized earnings per share are
non-US GAAP measures and are reconciled to the financial statements
further in this release. We believe that they are useful measures
with which to assess the company's financial performance as they
adjust and for non-cash and other items that do not affect the
company's ability to make distributions on common shares.
Amended Credit Facility
On February 10, 2009, Global Ship Lease obtained significant
relief with respect to its loan to value maintenance covenant under
terms of the company's amended $800 million credit agreement.
Specifically, the allowed ratio of borrowings to ship values has
been increased to a maximum of 100%, from 75% previously,
applicable for each of the test dates commencing with the next
which is due April 30, 2009 up to and including the test due on
April 30, 2010. During this period, the company will have no
restrictions on its ability to distribute dividends unless the loan
to value ratio exceeds 90%, at which point Global Ship Lease will
be required to place 50% of its quarterly cash available for
distribution in a pledged account. The pledged account can be
released back to the company if loan to value falls back below 90%
during a subsequent valuation period. As part of the amended
facility, the company has agreed to increase the margin of interest
paid on the existing loan to value pricing grid by 50 basis points,
and the grid has been extended to accommodate higher loan to value
ratios. The facility will now bear an interest margin ranging from
1.25% to 2.75% over LIBOR, depending on loan to value. In addition,
the commitment fee will increase to 0.50% from 0.25% and the
maximum availability under the credit facility will begin to
amortize from December 2011 rather than December 2012
previously.
Dividend
A dividend of $0.23 per Class A common share and unit and Class
B common share has been declared for the quarter ended December 31,
2008 and is due to be paid on March 5, 2009. The total dividend
payment is approximately $12.4 million. The 12.375 million Class C
common shares, which were issued on August 14, 2008 as advance part
payment for the four vessels delivered in December 2008, were
converted to Class A common shares on January 1, 2009 and
participate in the dividend. The dividend will be paid to
shareholders and unit holders of record as of February 20,
2009.
Cash Available for Common Dividends
Cash available for common dividends was $12.8 million for the
three months ended December 31, 2008. Cash available for common
dividends is a non-US GAAP measure and is reconciled to the
financial statements further in this release. We believe that it is
a useful measure with which to assess the company's operating
performance as it adjusts for the effects of non-cash items that do
not affect the company's ability to make distributions on common
shares. The percentage of cash available for common dividends
absorbed by the total dividend for Fourth Quarter 2008 is 97%.
Excluding the dividend to be paid on the newly converted Class C
common shares, the percentage is 74%. In addition, the dividend is
payable on the 7.4 million Class B common shares for the first
time.
Fleet Utilization
The table below shows vessel utilization for each of the
quarters in 2008. Global Ship Lease commenced its business of time
chartering out vessels in mid December 2007 and consequently
comparative figures for 2007 are not presented.
Three Three Three Three
months months months months Year
ended ended ended ended ended
Dec-31 Sep-30 Jun-30 Mar-31 Dec-31
Days 08 08 08 08 08
--------------------------------------------------------------------------
Ownership days 1,153 1,104 1,092 1,067 4,416
Planned offhire -
scheduled drydock - - - (15) (15)
Unplanned offhire -
bottom damage - (4) (4) - (8)
Unplanned offhire -
other - (14) (3) (5) (22)
--------------------------------------------------------------------------
Operating days 1,153 1,086 1,085 1,047 4,371
Utilization 100.0% 98.4% 99.4% 98.1% 99.0%
Fleet
The following table provides information about the on-the-water fleet
of 16 vessels chartered to CMA CGM.
Vessel Name Capacity Year Built Purchase Date Charter Remaining
--------------------------------------------------------------------------
TEUs(1) by GSL(2) Duration (years)
--------------------------------------------------------------------------
Ville d'Orion 4,113 1997 December 2007 4
Ville d'Aquarius 4,113 1996 December 2007 4
CMA CGM Matisse 2,262 1999 December 2007 8
CMA CGM Utrillo 2,262 1999 December 2007 8
Delmas Keta 2,207 2003 December 2007 9
Julie Delmas 2,207 2002 December 2007 9
Kumasi 2,207 2002 December 2007 9
Marie Delmas 2,207 2002 December 2007 9
CMA CGM La Tour 2,272 2001 December 2007 8
CMA CGM Manet 2,272 2001 December 2007 8
CMA CGM Alcazar 5,100 2007 January 2008 12
CMA CGM
Chateau d'lf 5,100 2007 January 2008 12
CMA CGM Thalassa 10,960 2008 December 2008 17
CMA CGM Jamaica 4,298 2006 December 2008 14
CMA CGM Sambhar 4,045 2006 December 2008 14
CMA CGM America 4,045 2006 December 2008 14
(1) Twenty-foot Equivalent Units.
(2) Purchase dates related to the Company's time charter business,
which occurred during both the predecessor and successor period.
The following table provides information about the contracted fleet.
Charter
Capacity in Year Built Estimated Charterer Duration
Vessel Name TEUs(1) Date to GSL Delivery (years)
--------------------------------------------------------------------------
CMA CGM Berlioz(2) 6,627 2001 July 2009 CMA CGM 12
Hull 789(3) 4,250 2010 October 2010 ZISS 7-8(4)
Hull 790(3) 4,250 2010 December 2010 ZISS 7-8(4)
(1) Twenty-foot Equivalent Units.
(2) Contracted to be purchased from CMA CGM.
(3) Contracted to be purchased from German interests.
(4) Seven year charter that could be extended to eight years at Charterers'
option.
Conference Call and Webcast
Global Ship Lease will hold a conference call to discuss the
company's results for the quarter ended December 31, 2008 today,
Wednesday, March 4, 2009 at 11:00 a.m. Eastern Time. There are two
ways to access the conference call:
(1) Dial-in: (877) 852-6580 or (719) 325-4815; Passcode:
9449847
Please dial in at least 10 minutes prior to 11:00 a.m. Eastern
Time to ensure a prompt start to the call.
(2) Live Internet webcast and slide presentation:
http://www.globalshiplease.com
If you are unable to participate at this time, a replay of the
call will be available through Wednesday, March 18, 2009 at (888)
203-1112 or (719) 457-0820. Enter the code 9449847 to access the
audio replay. The webcast will also be archived on the company's
website: http://www.globalshiplease.com.
About Global Ship Lease
Global Ship Lease is a rapidly growing 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 long-term, fixed rate charters
to world class container liner companies.
Global Ship Lease currently owns 16 vessels and has contracts in
place to purchase an additional three vessels. The Company has
contracted to purchase one vessel for $82 million from CMA CGM
expected to be delivered in July 2009. The Company also has
contracts in place to purchase two newbuildings from German
interests for approximately $77 million each which are expected to
be delivered in the fourth quarter of 2010.
Once all of the contracted vessels have been delivered, Global
Ship Lease will have a 19 vessel fleet with total capacity of
74,797 TEU and a weighted average age of 6.1 years. All of the
vessels including those contracted for future delivery, are under
long-term charters with an average remaining charter term of
approximately 10 years.
Reconciliation of Non-US GAAP Financial Measures
A. Cash Available for Common Dividends
Cash available for common dividends is a non-US GAAP measure and
is reconciled to the financial statements below. It represents net
earnings adjusted for non-cash items including depreciation,
amortization of deferred financing charges, accretion of earnings
for intangible liabilities, charge for equity based incentive
awards and change in fair value of derivatives. We also deduct an
allowance for the cost of future drydockings which due to their
substantial and periodic nature could otherwise distort quarterly
cashflow available for common dividends. Cash available for common
dividends is a non-US GAAP quantitative measure used to assist in
the assessment of the company's ability to pay common dividends.
Cash available for common dividends is not defined in accounting
principles generally accepted in the United States and should not
be considered to be an alternate to net earnings or any other
financial metric required by such accounting principles. We believe
that cash available for common dividends is a useful measure with
which to assess the company's operating performance as it adjusts
for the effects of non-cash items that do not affect the company's
ability to make distributions on common shares.
Three
Months
ended
December 31, 2008
--------------------------------------------------------------------------
(U.S. Dollars thousand)
Net loss (43,655)
Add: Depreciation 5,883
Charge for equity incentive awards 812
Amortization of deferred financing fees 133
Change in value of derivatives 50,675
Less: Allowance for future dry-docks (725)
Revenue accretion for intangible liabilities (53)
Deferred taxation (293)
--------------------------------------------------------------------------
Cash from operations available for common dividends 12,777
--------------------------------------------------------------------------
--------------------------------------------------------------------------
B. Normalized net earnings
Normalized net earnings is a non-US GAAP measure and is
reconciled to the financial statements below. It represents net
earnings adjusted for the change in fair value of derivatives.
Normalized net earnings is a non-GAAP quantitative measure which we
believe will assist investors and analysts who often adjust
reported net earnings for non-operating items such as change in
fair value of derivatives to eliminate the effect of non cash
non-operating items that do not affect operating performance or
cash for distribution as dividends. Normalized net earnings is not
defined in accounting principles generally accepted in the United
States and should not be considered to be an alternate to net
earnings or any other financial metric required by such accounting
principles. Normalized net earnings per share is calculated based
on normalized net earnings and the actual or pro forma weighted
average number of shares in the relevant period.
Three
months
ended
December 31, 2008
--------------------------------------------------------------------------
(U.S. Dollars thousand except share and per share data)
Net loss (43,655)
Adjust: Change in value of derivatives 50,675
--------------------------------------------------------------------------
Normalized net earnings 7,020
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Weighted average number of Class A common shares outstanding(1)
Basic and diluted 33,967,357
Net (loss) per share on reported earnings
Basic and diluted (1.29)
Normalized net income per share
Basic and diluted 0.21
(1) The weighted average number of shares basic and diluted excludes
Class B common shares, Class C common shares converted to Class A
common shares on January 1, 2009 and the effect of outstanding warrants
and stock based incentive awards. There is no dilution as the warrants
and stock based incentive awards were anti dilutive at December 31,
2008.
Safe Harbor Statement
This communication contains forward-looking statements.
Forward-looking statements provide Global Ship Lease's current
expectations or forecasts of future events. Forward-looking
statements include statements about Global Ship Lease's
expectations, beliefs, plans, objectives, intentions, assumptions
and other statements that are not historical facts. Words or
phrases such as "anticipate," "believe," "continue," "estimate,"
"expect," "intend," "may," "ongoing," "plan," "potential,"
"predict," "project," "will" or similar words or phrases, or the
negatives of those words or phrases, may identify forward-looking
statements, but the absence of these words does not necessarily
mean that a statement is not forward-looking. These forward-looking
statements are based on assumptions that may be incorrect, and
Global Ship Lease cannot assure you that these projections included
in these forward-looking statements will come to pass. Actual
results could differ materially from those expressed or implied by
the forward-looking statements as a result of various factors
The risks and uncertainties include, but are not limited to:
- future operating or financial results;
- expectations regarding the strength of the future growth of
the shipping industry, including the rate of annual demand growth
in the international containership industry;
- future payments of dividends and the availability of cash for
payment of dividends;
- Global Ship Lease's expectations relating to dividend payments
and forecasts of its ability to make such payments;
- future acquisitions, business strategy and expected capital
spending;
- operating expenses, availability of crew, number of off-hire
days, drydocking and survey requirements and insurance costs;
- general market conditions and shipping industry trends,
including charter rates and factors affecting supply and
demand;
- Global Ship Lease's ability to repay its credit facility and
grow using the available funds under its credit facility;
- assumptions regarding interest rates and inflation;
- change in the rate of growth of global and various regional
economies;
- risks incidental to vessel operation, including discharge of
pollutants and vessel collisions;
- Global Ship Lease's financial condition and liquidity,
including its ability to obtain additional financing in the future
to fund capital expenditures, acquisitions and other general
corporate activities;
- estimated future capital expenditures needed to preserve its
capital base;
- Global Ship Lease's expectations about the availability of
ships to purchase, the time that it may take to construct new
ships, or the useful lives of its ships;
- Global Ship Lease's continued ability to enter into long-term,
fixed-rate charters;
- Global Ship Lease's ability to capitalize on its management
team's and board of directors' relationships and reputations in the
containership industry to its advantage;
- changes in governmental and classification societies' rules
and regulations or actions taken by regulatory authorities;
- expectations about the availability of insurance on
commercially reasonable terms;
- unanticipated changes in laws and regulations; and
- potential liability from future litigation.
Forward-looking statements are subject to known and unknown
risks and uncertainties and are based on potentially inaccurate
assumptions that could cause actual results to differ materially
from those expected or implied by the forward-looking statements.
Global Ship Lease's actual results could differ materially from
those anticipated in forward-looking statements for many reasons
specifically as described in Global Ship Lease's filings with the
SEC. Accordingly, you should not unduly rely on these
forward-looking statements, which speak only as of the date of this
communication. Global Ship Lease undertakes no obligation to
publicly revise any forward-looking statement to reflect
circumstances or events after the date of this communication or to
reflect the occurrence of unanticipated events. You should,
however, review the factors and risks Global Ship Lease describes
in the reports it will file from time to time with the SEC after
the date of this communication.
GLOBAL SHIP LEASE, INC.
INTERIM UNAUDITED COMBINED FINANCIAL STATEMENTS
THREE MONTH PERIOD AND YEAR ENDED DECEMBER 31, 2008
Global Ship Lease, Inc.
Interim Unaudited Combined Balance Sheets
The interim unaudited combined financial statements up to
December 31, 2008 include two distinct reporting periods (i)
January 1, 2008 through August 14, 2008 ("Predecessor") and (ii)
August 15, 2008 through December 31, 2008 ("Successor"), which
relate to the period preceding the merger referred to in note 1 and
the period succeeding the merger, respectively. Further, the
Company derived virtually all of its revenue in 2008 from
chartering out its vessels under long-term fixed rate time charters
whereas in 2007, it earned virtually all of its revenue from
carrying containerized cargo. The interim unaudited combined
financial statements for the Successor period reflect the
acquisition of Global Ship Lease, Inc. under the purchase method of
accounting. The results of the Successor are not comparable to the
results of the Predecessor due to the difference in the basis of
presentation under purchase accounting as compared to historical
cost. Further, the results for the periods after January 1, 2008
are not comparable to results prior to that date due to the
different nature of the business.
(Expressed in thousands of U.S. dollars)
December 31, December 31,
Note 2008 2007
Successor Predecessor
-------------------------------------------------------------------------
Assets
Cash and cash equivalents $26,363 $1,891
Restricted cash 11 3,026 188,000
Accounts receivable 638 185
Inventories - 1,613
Prepaid expenses 734 231
Other receivables 1,713 194
Deferred financing costs 526 752
-------------------------------------------------------------------------
Total current assets 33,000 192,866
-------------------------------------------------------------------------
Vessels in operation 5 906,896 475,299
Vessel deposits 6 15,720 -
Other fixed assets 21 33
Intangible assets - purchase agreement 7,840 -
Derivative instruments 12 - 1,297
Deferred financing costs 3,131 5,130
-------------------------------------------------------------------------
Total non-current assets 933,608 481,759
-------------------------------------------------------------------------
Total Assets $966,608 $674,625
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Liabilities
Current installments of long term debt 7 $- $401,100
Intangible liability - charter agreements 1,608 -
Accounts payable 36 502
Accrued expenses 8 6,436 7,487
Derivative instruments 12 10,940 -
-------------------------------------------------------------------------
Total current liabilities 19,020 409,089
-------------------------------------------------------------------------
Long term debt 7 542,100 -
Shareholders' loan 8 - 176,875
Preferred shares 11 48,000 -
Intangible liability - charter
agreements 26,348 -
Derivative instruments 12 36,101 1,186
-------------------------------------------------------------------------
Total long-term liabilities 652,549 178,061
-------------------------------------------------------------------------
Total Liabilities $671,569 $587,150
-------------------------------------------------------------------------
Commitments and contingencies 9 - -
See accompanying notes to interim unaudited combined financial
statements
(Expressed in thousands of U.S. dollars)
December 31, December 31,
Note 2008 2007
Successor Predecessor
-------------------------------------------------------------------------
Stockholders' Equity
Common stock - authorized
100 shares $.01 par value; 100
shares issued and outstanding - -
Class A Common stock - authorized
214,000,000 shares with a $.01 par
value; 33,968,361 shares issued
and outstanding 11 339 -
Class B Common stock - authorized
20,000,000 shares with a $.01 par
value; 7,405,956 shares issued
and outstanding 11 74 -
Class C Common stock - authorized
15,000,000 shares with a $.01 par
value; 12,375,000 shares issued
and outstanding, convertible to
class A common shares 11 124 -
Retained earnings (deficit) (9,338) (96,925)
Net income(loss) for the period (43,970) 16,776
Due to CMA CGM - 162,885
Accumulated other comprehensive
income - 4,739
Additional paid in capital 347,810 -
-------------------------------------------------------------------------
Total Stockholders' Equity 295,039 87,475
-------------------------------------------------------------------------
Total Liabilities and Stockholders'
Equity $966,608 $674,625
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to interim unaudited combined financial
statements
Interim Unaudited Combined Statements of Income
(Expressed in thousands of U.S. dollars except share data)
Three months ended December 31,
Note 2008 2007
-------------------------------------------------------------------------
Successor Predecessor
Operating Revenues
Voyage revenue $- $78,348
Time charter revenue 26,305 2,909
-------------------------------------------------------------------------
26,305 81,257
-------------------------------------------------------------------------
Operating Expenses
Voyage expenses - 60,173
Vessel operating expenses 7,924 5,714
Depreciation 5 5,883 4,919
General and administrative 2,686 8,514
Other operating (income) expense (63) 4,399
-------------------------------------------------------------------------
Total operating expenses 16,430 83,719
-------------------------------------------------------------------------
Operating Income (Loss) 9,875 (2,462)
Non Operating Income (Expense)
Interest income 195 207
Interest expense (2,647) (4,795)
Realized and unrealized (loss)
gain on interest rate derivatives 12 (50,986) -
-------------------------------------------------------------------------
Income (Loss) before Income Taxes (43,563) (7,050)
Income taxes (92) (20)
-------------------------------------------------------------------------
Net Income (Loss) $(43,655) $(7,070)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
August 15 to January 1 to Year ended
December 31, August 14 December 31,
Note 2008 2008 2007
-------------------------------------------------------------------------
Successor Predecessor Predecessor
Operating Revenues
Voyage revenue $- $2,072 $332,186
Time charter revenue 39,095 55,883 2,909
-------------------------------------------------------------------------
39,095 57,955 335,095
-------------------------------------------------------------------------
Operating Expenses
Voyage expenses - 1,944 249,457
Vessel operating expenses 11,904 18,074 23,959
Depreciation 5 8,731 12,163 16,119
General and administrative 3,712 3,814 17,751
Other operating (income)
expense (106) 93 (2,341)
-------------------------------------------------------------------------
Total operating
expenses 24,241 36,088 304,945
-------------------------------------------------------------------------
Operating Income (Loss) 14,854 21,867 30,150
Non Operating Income
(Expense)
Interest income 413 424 207
Interest expense (3,842) (17,600) (13,561)
Realized and unrealized
(loss) gain on
interest rate
derivatives 12 (55,293) 2,749 -
-------------------------------------------------------------------------
Income (Loss) before
Income Taxes (43,868) 7,440 16,796
Income taxes (102) (23) (20)
-------------------------------------------------------------------------
Net Income (Loss) $(43,970) $7,417 $16,776
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to interim unaudited combined financial
statements
(Expressed in thousands of U.S. dollars except share data)
Three months ended December 31,
Note 2008 2007
-------------------------------------------------------------------------
Successor Predecessor
Weighted average number of common
shares outstanding basic and
diluted n.a. 100
Net income (loss) per share in
$ per share basic and diluted n.a. (70,700)
Weighted average number of Class A
common shares outstanding
Basic and diluted 14 33,967,357 n/a
Net income (loss) in $ per
share amount
Basic and diluted 14 $(1.29) n/a
Weighted average number of Class B
common shares outstanding
Basic and diluted 14 7,405,956 n/a
Net income (loss) in $ per share
amount
Basic and diluted 14 $- n/a
August 15 to January 1 to Year ended
December 31, August 14 December 31,
Note 2008 2008 2007
-------------------------------------------------------------------------
Successor Predecessor Predecessor
Weighted average
number of common
shares outstanding
basic and diluted n.a. 100 100
Net income (loss) per
share in $ per share
basic and diluted n.a. $74,170 $167,760
Weighted average number
of Class A common
shares outstanding
Basic and diluted 14 33,800,307 n.a. n.a.
Net income (loss) in
$ per share amount
Basic and diluted 14 $(1.30) n.a. n.a.
Weighted average number
of Class B common
shares outstanding
Basic and diluted 14 7,405,956 n.a. n.a.
Net income (loss) in
$ per share amount
Basic and diluted 14 $- n.a. n.a.
See accompanying notes to interim unaudited combined financial
statements
Interim Unaudited Combined Statements of Cash Flows
(Expressed in thousands of U.S. dollars)
Three months ended December, 31
Note 2008 2007
-------------------------------------------------------------------------
Successor Predecessor
Cash Flows from Operating Activities
Net income (loss) $(43,655) $(7,070)
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating
Activities
Unrealized foreign exchange (80) -
Depreciation 5 5,883 4,919
Amortization of deferred financing costs 133 785
Change in fair value of certain
financial derivative instruments 12 50,675 10,439
Intangible liability amortization (53) -
Settlements of hedges which do not
qualify for hedge accounting 12 350 1,183
Share-based compensation 13 812 -
Decrease (increase) in other
receivables and prepaid expenses (367) 30,814
Decrease (increase) in inventories - 5,722
(Decrease) increase in accounts
payable and other liabilities 1,493 (18,836)
Periodic costs relating to drydocks - (3,125)
-------------------------------------------------------------------------
Net Cash Provided by Operating
Activities 15,191 24,831
-------------------------------------------------------------------------
Cash Flows from Investing Activities
Settlements of hedges which do not
qualify for hedge accounting 12 (350) (1,184)
Acquisition of Global Ship Lease, Inc.
net of cash acquired 3 (984) -
Release of trust account 3 - -
Purchase of other fixed assets (257,450) (36)
Cash paid for purchases of vessels
and vessel prepayments - (146,593)
-------------------------------------------------------------------------
Net Cash Provided (Used) in Investing
Activities (258,784) (147,813)
-------------------------------------------------------------------------
Cash Flows from Financing Activities
Proceeds from debt 256,000 401,100
Variation in restricted cash (3,026) (188,000)
Issuance costs of debt (4) (5,892)
Proceeds from shareholder loans - 176,875
Proceeds from warrant exercise 3,026 -
Buyback of shares 3 - -
(Decrease)/increase in amount due to
CMA CGM -
Deemed distribution to CMA CGM - (16,119)
Dividend payments 11 (15,624) (96,925)
Repayments of long term debt 3 - (146,166)
Repayments of capital lease obligations - -
-------------------------------------------------------------------------
Net Cash Provided (Used) by Financing
Activities 240,372 124,873
-------------------------------------------------------------------------
Net Increase in Cash and Cash
Equivalents (3,221) 1,891
Cash and Cash Equivalents at start of
Period 29,584 -
-------------------------------------------------------------------------
Cash and Cash Equivalents at end of Period 26,363 1,891
-------------------------------------------------------------------------
-------------------------------------------------------------------------
August 15 to January 1 to Year ended
December 31 August 14 December 31,
Note 2008 2008 2007
-------------------------------------------------------------------------
Successor Predecessor Predecessor
Cash Flows from
Operating Activities
Net income (loss) $(43,970) $7,417 $16,776
Adjustments to Reconcile
Net Income to Net Cash
Provided by Operating
Activities
Unrealized foreign
exchange (80) - -
Depreciation 5 8,731 12,163 16,119
Amortization of deferred
financing costs 199 491 2,194
Change in fair value of
certain financial
derivative instruments 12 54,851 (3,081) 9,132
Intangible liability
amortization (67) - -
Settlements of hedges
which do not qualify
for hedge accounting 12 632 141 58
Share-based compensation 13 1,167 - -
Decrease (increase) in
other receivables and
prepaid expenses 337 (980) 26,574
Decrease (increase) in
inventories - 1,613 2,390
(Decrease) increase in
accounts payable and
other liabilities (7,849) 4,422 (11,918)
Periodic costs relating
to drydocks - (1,460) (4,738)
-------------------------------------------------------------------------
Net Cash Provided by
Operating Activities 13,951 20,726 56,587
-------------------------------------------------------------------------
Cash Flows from Investing
Activities
Settlements of hedges
which do not qualify
for hedge accounting 12 (632) (4,871) (58)
Acquisition of Global
Ship Lease, Inc.
net of cash acquired 3 (6,547) - -
Release of trust account 3 317,446 - -
Purchase of other
fixed assets - - (36)
Cash paid for purchases
of vessels and vessel
prepayments (272,927) - (183,713)
-------------------------------------------------------------------------
Net Cash Provided (Used)
in Investing Activities 37,340 (4,871) (183,807)
-------------------------------------------------------------------------
Cash Flows from
Financing Activities
Proceeds from debt 256,000 - 401,100
Variation in restricted
cash (3,026) 188,000 (188,000)
Issuance costs of debt (3,856) (276) (5,892)
Proceeds from shareholder
loans - - 176,875
Proceeds from warrant
exercise 3,026 - -
Buyback of shares 3 (147,053) - -
(Decrease)/increase in
amount due to CMA CGM - (188,713) (11,881)
Deemed distribution to
CMA CGM - (505) (96,925)
Dividend payments 11 (15,624) - -
Repayments of long term
debt 3 (115,000) - (146,166)
Repayments of capital
lease obligations - - -
-------------------------------------------------------------------------
Net Cash Provided (Used)
by Financing
Activities (25,533) (1,494) 129,111
-------------------------------------------------------------------------
Net Increase in Cash
and Cash Equivalents 25,758 14,361 1,891
Cash and Cash
Equivalents at start
of Period 605 1,891 -
-------------------------------------------------------------------------
Cash and Cash Equivalents
at end of Period $26,363 16,252 1,891
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to interim unaudited combined financial
statements
(Expressed in thousands of U.S. dollars)
Three months ended December 31,
Note 2008 2007
-------------------------------------------------------------------------
Successor Predecessor
Supplemental Information
Non cash investing and financing
activities
Issuance of shares and preferred
shares for the acquisition of
100% shares of Global Ship Lease,
Inc. $- $-
Dividend declared and not yet paid $- $-
Total interest paid during period $2,535 $2,745
Total tonnage tax and income tax
paid $- $90
-------------------------------------------------------------------------
-------------------------------------------------------------------------
August 15 to January 1 to Year ended
December 31 August 14 December 31,
Note 2008 2008 2007
-------------------------------------------------------------------------
Successor Predecessor Predecessor
Supplemental Information
Non cash investing and
financing activities
Issuance of shares and
preferred shares for
the acquisition of
100% shares of Global
Ship Lease, Inc. $216,730 $- $-
Dividend declared and not
yet paid $nil $- $-
Total interest paid during
period $4,639 $10,782 $10,102
Total tonnage tax and income
tax paid $- $- $310
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to interim unaudited combined financial
statements
Global Ship Lease, Inc.
Interim Unaudited Combined Statements of Stockholders'
Equity
Number of
Common Stock Accumulated
at $0.01 Common Earnings
Par value Stock (Deficit)
-------------------------------------------------------------------------
Balance at December 31,
2005 (Predecessor) - $- $-
Incorporation of Global Ship
Lease, Inc. 100 - -
Change in amount due from CMA CGM - - -
Allocation of prior year net income - - -
Net income for the period - - -
Effect of derivative instruments - - -
Effect of currency translation
adjustment - - -
-------------------------------------------------------------------------
Balance at December 31, 2006
(Predecessor) - - -
Incorporation of Global Ship Lease,
Inc. 100 - -
Change in amount due from CMA CGM - - -
Allocation of prior year net income - - -
Net income for the period - - -
Effect of derivative instruments - - -
Effect of currency translation
adjustment - - -
Other effect of the transfer of
the initial ten vessels in 2007 - - -
Deemed distribution to CMA CGM - - (96,925)
-------------------------------------------------------------------------
Balance at December 31, 2007
(Predecessor) 100 - (96,925)
Change in amount due from CMA CGM - - -
Allocation of prior year net income - - (4,967)
Other effect of the transfer of the
two vessels in 2008 - - -
Deemed distribution to CMA CGM - - (505)
Net income for the period - - -
Allocation of net income - - 8,068
-------------------------------------------------------------------------
Balance at August 14, 2008
(Predecessor) 100 - (94,329)
-------------------------------------------------------------------------
Accumulated
Other
Net Due to Comprehensive
Income CMA CGM Income
-------------------------------------------------------------------------
Balance at December 31, 2005
(Predecessor) $9,005 $(3,660) $13,100
Incorporation of Global Ship Lease,
Inc. - - -
Change in amount due from CMA CGM - 110,005 -
Allocation of prior year net income (9,005) 9,005 -
Net income for the period 32,677 - -
Effect of derivative instruments - - (3,554)
Effect of currency translation
adjustment - - 12,423
-------------------------------------------------------------------------
Balance at December 31, 2006
(Predecessor) 32,677 115,350 21,969
Incorporation of Global Ship Lease,
Inc. - - -
Change in amount due from CMA CGM - (11,881) -
Allocation of prior year net income (32,677) 32,677 -
Net income for the period 16,776 - -
Effect of derivative instruments - - (211)
Effect of currency translation
adjustment - - 9,509
Other effect of the transfer of
the initial ten vessels in 2007 - 26,739 (26,528)
Deemed distribution to CMA CGM - - -
-------------------------------------------------------------------------
Balance at December 31, 2007
(Predecessor) 16,776 162,885 4,739
Change in amount due from CMA CGM - (188,716) -
Allocation of prior year net income (16,776) 21,743 -
Other effect of the transfer of
the two vessels in 2008 651 4,088 (4,739)
Deemed distribution to CMA CGM - - -
Net income for the period 7,417 - -
Allocation of net income (8,068) - -
-------------------------------------------------------------------------
Balance at August 14, 2008
(Predecessor) - - -
-------------------------------------------------------------------------
Additional
paid in Stockholders'
Capital Equity
-------------------------------------------------------------------------
Balance at December 31, 2005 (Predecessor) $- $18,445
Incorporation of Global Ship Lease, Inc. - -
Change in amount due from CMA CGM - 110,005
Allocation of prior year net income - -
Net income for the period - 32,677
Effect of derivative instruments - (3,554)
Effect of currency translation adjustment - 12,423
-------------------------------------------------------------------------
Balance at December 31, 2006 (Predecessor) - 169,996
Incorporation of Global Ship Lease, Inc. - -
Change in amount due from CMA CGM - (11,881)
Allocation of prior year net income - -
Net income for the period - 16,776
Effect of derivative instruments - (211)
Effect of currency translation adjustment - 9,509
Other effect of the transfer of the initial ten
vessels in 2007 - 211
Deemed distribution to CMA CGM - (96,925)
-------------------------------------------------------------------------
Balance at December 31, 2007 (Predecessor) - 87,475
Change in amount due from CMA CGM - (188,716)
Allocation of prior year net income - -
Other effect of the transfer of the two vessels
in 2008 - -
Deemed distribution to CMA CGM - (505)
Net income for the period - 7,417
Allocation of net income - -
-------------------------------------------------------------------------
Balance at August 14, 2008 (Predecessor) - (94,329)
-------------------------------------------------------------------------
See accompanying notes to interim unaudited combined financial
statements
Global Ship Lease, Inc.
Number of
Common Stock Accumulated
at $0.01 Common Earnings
Par value Stock (Deficit) Net Income
-------------------------------------------------------------------------
Balance at
August 14, 2008
(Predecessor) 100 - (94,329) -
Elimination of
historical
stockholders'
equity (100) - 94,329 -
Recognition of GSL
Holdings
stockholders'
equity pre-merger 26,685,209 266 6,286 -
Issuance of shares
and warrants in
connection with
the merger
(note 3)
Class A 6,778,650 68 - -
Class B 7,405,956 74 - -
Class C 12,375,000 124 - -
Warrants - - - -
Warrants exercised
into Class A
shares (note 11) 504,502 5 - -
Restricted Stock
Units (note 13) - - - -
Net (loss) for the
period - - - (43,970)
Dividends declared
(note 11) - - (15,624) -
-------------------------------------------------------------------------
Balance at
December 31, 2008
(Successor) 53,749,317 $537 $(9,338) $(43,970)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Accumulated
Other Additional
Due to Comprehensive paid in Stockholders'
CMA CGM Income Capital Equity
-------------------------------------------------------------------------
Balance at August
14, 2008 (Predecessor) - - - (94,329)
Elimination of
historical
stockholders' equity - - - 94,329
Recognition of GSL
Holdings stockholders'
equity pre-merger - - 175,375 181,927
Issuance of shares
and warrants in
connection with the
merger (note 3)
Class A - - 51,672 51,740
Class B - - 26,043 26,117
Class C - - 89,348 89,472
Warrants - - 1,184 1,184
Warrants exercised
into Class A shares
(note 11) - - 3,021 3,026
Restricted Stock Units
(note 13) - - 1,167 1,167
Net (loss) for the period - - - (43,970)
Dividends declared
(note 11) - - - (15,624)
-------------------------------------------------------------------------
Balance at December 31,
2008 (Successor) $- $- $347,810 $295,039
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to interim unaudited combined financial
statements
Global Ship Lease, Inc.
Notes to the Interim Unaudited Combined Financial Statements
(Expressed in thousands of U.S. dollars)
1. General
On August 14, 2008, Global Ship Lease, Inc. (the "Company")
merged indirectly with Marathon Acquisition Corp. ("Marathon"), a
company then listed on The American Stock Exchange, pursuant to an
agreement and plan of merger dated March 21, 2008 as amended, which
we refer to as the merger agreement. Following the merger, the
Company became listed on the New York Stock Exchange on August 15,
2008.
Under the merger agreement, Marathon, a U.S. corporation, first
merged with its 100% owned Marshall Islands subsidiary, GSL
Holdings, Inc. ("Holdings"), with Holdings continuing as the
surviving company. Global Ship Lease, Inc., at that time a
subsidiary of CMA CGM, then merged with Holdings, with Holdings
again being the surviving company. Holdings was renamed Global Ship
Lease, Inc. and became listed on the New York Stock Exchange on
August 15, 2008.
In accordance with SFAS No. 141, "Business Combinations" ("FAS
141"), Marathon (through its subsidiary Holdings) has been treated
as the accounting acquirer and Global Ship Lease, Inc. was treated
as the acquiree. Under the purchase method of accounting, the
identifiable assets and assumed liabilities of Global Ship Lease,
Inc. were recorded at their estimated fair values as of the
acquisition date. The excess of the fair value of the net acquired
assets over the purchase price has been recorded as a pro rata
reduction of identified intangible assets, vessels in operation and
other fixed assets. Because the activities of Marathon were
insignificant prior to the acquisition, Global Ship Lease, Inc.
(the acquiree), was determined to be the Predecessor for the
purpose of reporting historical financial information.
The unaudited interim financial statements are for the periods
August 15, 2008 to December 31, 2008 (period titled "Successor"
reflecting results of the combined operations following the
merger), January 1, 2008 to August 14, 2008 (period labeled
"Predecessor", reflecting the results of operations as historically
reported of Global Ship Lease, Inc. prior to the merger), and the
three month period and year ended December 31, 2007 (also labeled
"Predecessor"). Under Predecessor accounting rules, the financial
statements include the results of the vessels when they were owned
and operated by CMA CGM (rather than Global Ship Lease, Inc.) in
its business of carrying containerized cargo prior to their sale to
the Company, referred to hereafter as the period of ownership by
CMA CGM.
As the merger was consummated on August 14, 2008, the balance
sheet as of December 31, 2008 (labeled "Successor") reflects the
acquisition under the purchase method of accounting of all the
identified assets and assumed liabilities of Global Ship Lease,
Inc. The balance sheet as of December 31, 2007 (labeled
"Predecessor") reflects the historical balance sheet of Global Ship
Lease, Inc. as previously reported.
The term "Company" refers to both Successor and Predecessor
periods.
2. Nature of Operations and Basis of Preparation
The Company has a business of owning and chartering out
containerships under long term time charters. It contracted under
an asset purchase agreement dated December 5, 2007, subject to
certain conditions, to acquire 17 containerships from CMA CGM. Of
these, 10 were purchased by the Company during December 2007, two
in January 2008 and four in December 2008. The remaining vessel is
scheduled to be purchased in July 2009. All vessels are, or will
be, time chartered to CMA CGM for remaining terms ranging from four
to seventeen years. The Company has also entered into an agreement
with German interests to acquire in the fourth quarter of 2010 two
newbuildings for approximately $77 million per vessel. These
vessels will be chartered to ZIM Integrated Shipping Services
Limited ("ZISS") for a period of seven years that could be extended
to eight years at ZISS's option.
During the period covered by these combined financial
statements, the Company operated under two business models. During
the period up to the delivery of the 10 vessels in December 2007
and two ships in January 2008 (i.e. all of the year ended December
31, 2006, virtually all of the year ended December 31, 2007 and,
for two ships of the fleet, for a few days of January 2008 included
in the year ended December 31, 2008) operations involved earning
freight revenues from containerized transportation of goods for
shippers whilst the vessels were owned by CMA CGM. Following the
purchase by the Company of 10 vessels in December 2007 and the
further two vessels in January 2008, the activities changed and
consisted solely of ownership and provision of vessels to container
shipping companies under time charters.
Fleet
The following table provides information about the 16 vessels in
the fleet chartered to CMA CGM and reflected in these combined
financial statements:
Charter
Remaining Daily
Capacity Year Purchase Date Duration Charter
Vessel Name in TEUs(1) Built by GSL (years)(2) Rate ($)
--------------------------------------------------------------------------
Ville d'Orion 4,113 1997 December 2007 4 $28,500
Ville d'Aquarius 4,113 1996 December 2007 4 $28,500
CMA CGM Matisse 2,262 1999 December 2007 8 $18,465
CMA CGM Utrillo 2,262 1999 December 2007 8 $18,465
Delmas Keta 2,207 2003 December 2007 9 $18,465
Julie Delmas 2,207 2002 December 2007 9 $18,465
Kumasi 2,207 2002 December 2007 9 $18,465
Marie Delmas 2,207 2002 December 2007 9 $18,465
CMA CGM La Tour 2,272 2001 December 2007 8 $18,465
CMA CGM Manet 2,272 2001 December 2007 8 $18,465
CMA CGM Alcazar 5,100 2007 January 2008 12 $33,750
CMA CGM Chateau d'lf 5,100 2007 January 2008 12 $33,750
CMA CGM Thalassa 10,960 2008 December 2008 17 $47,200
CMA CGM Jamaica 4,298 2006 December 2008 14 $25,350
CMA CGM Sambhar 4,045 2006 December 2008 14 $25,350
CMA CGM America 4,045 2006 December 2008 14 $25,350
(1) Twenty-foot Equivalent Units.
(2) The table shows purchase dates of vessels related to the Company's time
charter business, which occurred during both the predecessor and
successor period
The following table provides information about the contracted
fleet not reflected in these combined financial statements, other
than deposits paid on Hull 789 and Hull 790:
Estimated Charter Daily
Capacity in Year Delivery Date Duration Charter
Vessel Name TEUs(1) Built to GSL Charterer (years) Rate($)
--------------------------------------------------------------------------
CMA CGM Berlioz(2) 6,627 2001 July 2009 CMA CGM 12 $34,000
Hull 789(3) 4,250 2010 October 2010 ZISS 7-8(4) $28,000
Hull 790(3) 4,250 2010 December 2010 ZISS 7-8(4) $28,000
(1) Twenty-foot Equivalent Units
(2) Contracted to be purchased from CMA CGM (note 9)
(3) Contracted to be purchased from German interests (note 9)
(4) Seven years charter that could be extended to eight years at
Charterers' option
3. Accounting for the Merger
On August 14, 2008, pursuant to the terms of the merger
agreement, Holdings acquired all of Global Ship Lease, Inc.'s
outstanding capital stock for $235,300 excluding transaction
expenses, funded by the issue to CMA CGM of 6,778,650 Class A
common shares, 3,934,050 Class B common shares, 12,375,000 Class C
common shares, warrants to acquire 3,131,900 Class A common shares
with an exercise price of $9.25 and 1,000 Series A preferred shares
with a total nominal value of $48,000 and $18,570 in cash. The
rights of the different classes of shares are set out in note
11.
The Company accounted for the business combination under the
purchase method as prescribed by FAS 141. Under the purchase
method, the identifiable assets acquired and liabilities assumed
were recorded at their fair values as of the acquisition date. Any
excess of the fair value of the net acquired assets over the
purchase price was recorded as a pro rata reduction of identified
intangible assets, vessels in operation and other fixed assets.
The following table shows the calculation of allocable purchase
price:
Fair Value
Number of Per
Instruments Fair Value Instrument
-------------------------------------------------------------------------
Cash payment (1) n.a. $18,570 n.a.
Class A common shares 6,778,650 51,992 7.67
Class B common shares 3,934,050 26,083 6.63
Class C common shares 12,375,000 89,471 7.23
Warrants to acquire Class A
common shares 3,131,900 1,184 0.38
Mandatory redeemable preferred
shares 1,000 48,000 n.a.
-------------------------------------------------------------------------
235,300
Transaction related expenses 14,556 n.a.
-------------------------------------------------------------------------
Total allocable purchase price $249,856
-------------------------------------------------------------------------
(1) An amount of $8,056 cash was paid in the successor period
Equity instruments issued in connection with the merger were
assessed at their respective fair value reflecting specific
features of each instrument at the date of the announcement of the
definitive terms of the merger on July 24, 2008.
The Class A common shares have been valued at the $7.67 per
share average closing price of the common stock (using the average
closing price of the five business days on and surrounding the date
of the announcement of definitive terms of the Merger i.e. July 24,
2008). The rights of holders of Class B common shares are identical
to those of holders of Class A common shares, except that the
holders of Class B common shares were not entitled to receive any
dividends with respect to any quarter prior to those paid with
respect to the fourth quarter of 2008 and their dividend rights
will be subordinated to those of holders of Class A common shares
until at least the third quarter of 2011. The rights of holders of
Class C common shares were identical to those of holders of Class A
common shares, except that holders of Class C common shares were
not entitled to receive any dividends. The Class C common shares
converted into Class A common shares on a one-for-one basis on
January 1, 2009. Management estimated the per share value of the
Class C common shares at the merger by discounting the share price
of $7.67 by the present value of the first two $0.23 dividends
foregone in 2008. Management calculated the discount rate of 10.75%
by using the average of (a) a 12.6% cost of equity using the
dividend growth model (assumes a comparable dividend of 8.6% and
long-term dividend growth of 4.0%) and (b) an 8.9% cost of equity
using the beta method (4.38% U.S. Risk Free Rate (30-year U.S.
Treasury) plus a 5.0% adjusted equity market risk premium). Using
this rate, the discount for the present value of the waived
dividends is $0.44. This results in an implied share price of
$7.23. Management estimated the per share value of the Class B
common shares using the same method for the forgone dividends as
used for Class C common shares. Management also applied an
additional discount for subordinated dividend risk and impaired
liquidity. Management estimated this additional discount of 7.8%
(or $0.60 per share) by examining trading performance of
subordinated share class for precedent transactions. This results
in an implied share price of $6.63.
Warrants issued to CMA CGM as part of the purchase price were
valued using the Black-Scholes option pricing model, with an
average share price of $7.67 (as described above), expected
volatility at 30.0%, a risk free rate of 3.87%, an expected
dividend yield of 11.99% over the duration of the instrument, and
an expected duration of five years.
The following table shows the fair value of identifiable assets
acquired and liabilities assumed at the merger date:
Fair Value of Adjustments Purchase
Net Assets for Negative Price
acquired Goodwill Allocation
--------------------------------------------------------------------------
Cash and cash equivalents $16,252 $- $16,252
Prepaid expenses and other receivables 2,894 - 2,894
Derivative instruments 7,811 - 7,811
Vessels in operation 635,000 (110,921) 524,079
Vessel deposit 99,000 - 99,000
Other fixed assets 26 (5) 21
Intangible assets - purchase agreement 51,750 (9,043) 42,707
Long-term debt (401,100) - (401,100)
Accounts payable (1,181) - (1,181)
Accrued expenses and other liabilities (12,604) - (12,604)
Intangible liabilities - charter
agreements (28,023) - (28,023)
Negative goodwill to be allocated (119,969) 119,969 -
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Total allocable purchase price $249,856 $- $249,856
--------------------------------------------------------------------------
--------------------------------------------------------------------------
The fair value of the identifiable acquired assets and
liabilities has been reduced by $119,969 which equals the estimated
excess of the fair value of the net acquired assets over the
purchase price. Three asset classes were reduced pro rate: (i)
identified intangible assets of $51,750 to $42,707, (ii) other
fixed assets from $26 to $21 and (iii) vessels in operation from
$635,000 to $524,079.
Derivative instruments were solely comprised of interest rate
financial instruments that were recognized at their mark-to-market
value. Vessels in operation were written up to their estimated fair
market value at the merger date. The intangible asset recognized in
connection with the CMA CGM contracted fleet purchase agreement was
valued by comparing the acquisition prices as per the agreement and
the vessels estimated fair market values at the merger date. The
intangible liability recognized in connection with charter
agreements was valued using the market approach where the Company's
actual charter agreements were compared to market rates at the
merger date and discounted at a 8.0% interest rate.
In connection with the merger, $317,446 previously held in trust
by Marathon was released. These funds were used to repay $115,000
of the assumed credit facility, to purchase $147,053 of shares from
shareholders under the merger agreement and a share repurchase
program, to pay $18,500 of costs associated with the merger and to
pay $18,570 to CMA CGM due under the merger agreement. The balance
was held for general working capital purposes including financing
the deposits of $15,477 for the two vessels to be purchased in Q4
2010 paid in September 2008.
Unaudited Supplemental Pro Forma Information under FAS 141
The following pro forma information for the years ended December
31, 2008 and 2007 assume that the acquisition of the Company
occurred at the beginning of each of the reporting periods being
presented.
Three months ended Year ended
December 31, December, 31
2008 2007 2008 2007
-------------------------------------------------------------------------
Operating revenue $26,325 $20,761 $100,135 $75,607
Net income (loss) $(42,865) $5,790 $(26,045) $15,256
Pro forma net income
per share in $
Weighted average
number of Class A
common shares
outstanding (a)
Basic 33,967,357 33,967,357 33,591,788 33,592,403
Diluted 33,967,357 45,188,839 33,591,788 44,401,990
Net income per
share amount
Basic (1.26) 0.17 $(0.78) $0.45
Diluted (1.26) 0.13 $(0.78) $0.34
Weighted average
number of Class B
common shares
outstanding (a)
Basic 7,405,956 7,405,956 7,405,956 7,405,956
Diluted 7,405,956 7,405,956 7,405,956 7,405,956
Net income per
share amount
Basic $- $- $- $-
Diluted $- $- $- $-
(a) Assuming Class A and B common shares are participating securities under
the two-class method.
4. Significant Accounting Policies
The accompanying financial information is unaudited and reflects
all adjustments, consisting solely of normal recurring adjustments,
which, in the opinion of management, are necessary for a fair value
at the merger date presentation of results for the interim periods
presented. They do not include all disclosures required under
United States Generally Accepted Accounting Principles ("GAAP") for
annual financial statements. These interim unaudited combined
financial statements should be read in conjunction with the
Company's Predecessor financial statements as of December 31, 2007
filed with the Securities and Exchange Commission as part of the
filing of the Registration Statement on Form F-1 by Global Ship
Lease, Inc., dated September 23, 2008.
(a) Intangible assets - purchase agreement
In connection with the merger (note 1), the Company recognised
an intangible asset arising from the comparison of the acquisition
prices per the asset purchase agreement and the estimated fair
value of the vessels yet to be purchased. This intangible asset is
not amortized and has or will be transferred to the appropriate
vessel on delivery.
Intangible assets are tested for impairment annually or more
frequently due to events or changes in circumstances that indicate
that the asset might be impaired. If the estimated cash flows from
the use of the asset and its eventual disposition are below the
asset's net book value, then the asset is deemed to be impaired and
written down to its fair value.
(b) Derivative instruments - Interest rate hedging
activities
The Company has entered into certain hedging agreements in
connection with its borrowings.
Interest rate derivatives are initially recognized at fair value
on the date a derivative contract is entered into and are
subsequently re-measured at their fair value. The method of
recognizing the resulting gain or loss depends on whether the
derivative is designated and qualifies as a hedging instrument, and
if so, the nature of the item being hedged.
The Company's interest rate derivative instruments do not
qualify for hedge accounting. Changes in the fair value, as well as
cash settlements of interest rate derivative instruments, are
recognized immediately in the statement of income within "Realized
and unrealized gain on interest rate derivatives ". Cash flows
related to interest rate derivatives (including payments and
periodic cash settlements) are included within "Net cash provided
(used) by investing activities".
The fair value of derivatives is presented on the face of the
balance sheet under the line item "Derivative instruments" and are
split into their current and non-current portions based on the net
cash flows expected within one year.
� Intangible liabilities - charter agreements
In connection with the merger (note 1), the Company recognised
an intangible liability using the market approach wherein the
Company's actual charter agreements were compared to market rates
at the merger date.
These intangible lease liabilities are amortized as an increase
of time charter revenue over the remaining term of the relevant
charter.
(d) Comparative figures
Certain of the figures presented in the balance sheet have been
reclassified for comparative purposes to conform to the financial
statement presentation adopted for the current year.
(e) Share based compensation
The Company awards restricted stock units to its employees and
directors which vest, based on service conditions only, over a
period of time up to three years from the award date.
The fair value of restricted stock unit grants is determined by
reference to the quoted stock price on the date of grant, as
adjusted for estimated dividends forgone until the restricted stock
units vest. Compensation expense is recognized based on a graded
expense model over the vesting period.
(f) Dividends
Dividends are recorded in the period in which they are declared
by the Company's Board of directors. Dividends to be paid are
presented in the combined balance sheet in the line item "dividend
payable".
(g) Earnings per share
In accordance with SFAS No. 128, Earnings Per Share, basic
earnings per common share is based on income available to common
shareholders divided by the weighted-average number of common
shares outstanding during the period, excluding non-vested
restricted stock units. Diluted earnings per common share is
calculated by applying the treasury stock method. All outstanding
warrants and non-vested restricted stock units that have a dilutive
effect are included in the calculation. The basic and diluted
Earnings Per Share for the Successor period is presented for each
category of participating common shares under the two-class
method.
5. Vessels in Operation, less Accumulated Depreciation
December 31, December 31,
2008 2007
Successor Predecessor
-------------------------------------------------------------------------
Cost $915,627 $539,350
Accumulated Depreciation (8,731) (64,051)
-------------------------------------------------------------------------
Net Book Value $906,896 $475,299
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Variations in net book value of vessels including drydocking,
are presented below:
December 31, December 31,
2008 2007
Successor Predecessor
-------------------------------------------------------------------------
Opening balance $475,299 $286,229
Depreciation expense (Predecessor) (12,163) (16,119)
Additions in the period (Predecessor) 1,460 188,463
Purchase price adjustment (note 3) 59,302 -
Additions in the period (Successor) 356,862 -
Transfer from intangible assets - purchase
agreement 34,867 -
Depreciation expense (Successor) (8,731) -
Foreign currency translation adjustment - 16,726
-------------------------------------------------------------------------
Closing balance 906,896 $475,299
-------------------------------------------------------------------------
-------------------------------------------------------------------------
As of December 31, 2008 all 16 of the vessels delivered to the
Company were pledged as collateral under the credit facility
agreement.
6. Vessel Deposits
December 31, December 31,
2008 2007
Successor Predecessor
-------------------------------------------------------------------------
Additions in the period $15,477 $-
Capitalized interest 243 -
-------------------------------------------------------------------------
Closing balance $15,720 $-
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The additions during the period relate to deposits paid for two
4,250 TEU newbuildings the Company has agreed to acquire from
German interests for approximately $77 million per vessel. The
purchase is subject to the completion of customary additional
documentation and closing conditions.
7. Long-Term Debt
Long-term debt is summarized as follows:
December 31, December 31,
2008 2007
Successor Predecessor
-------------------------------------------------------------------------
Credit facility, at Libor USD + 0.75% to 1.10%
(below) $542,100 $401,100
Less current installments of long-term debt - (401,100)
-------------------------------------------------------------------------
Closing balance $542,100 $-
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The Company established a $800,000 senior secured credit
facility with Fortis Bank, Citibank, HSH Nordbank, Sumitomo Mitsui,
KFW and DnB Nor Bank. The margin applicable on interest payable
under the credit facility varies from 0.75% to 1.10% depending on
the "leverage ratio", which is the ratio of the balance outstanding
on the credit facility to the aggregate market value of the
vessels, as determined from time to time. The Company also pays a
commitment fee of 0.25% per annum based on the undrawn portion of
the credit facility, which amounted to $257,900 at December 31,
2008. Further to the amendment of the terms of the credit facility
as described below and in note 21 "Subsequent events", the credit
facility amount will reduce commencing four years from the date of
the closing of the facility which was in December 2007 in 16
quarterly installments.
This credit facility is secured by, inter alia, first priority
mortgages on each of the vessels in the security package, a pledge
of shares of the vessel owning subsidiaries as well as assignments
of earnings and insurances. The financial covenants within the
credit facility are: a) a minimum cash balance of the lower of
$15,000 or six months net interest expense; b) net debt to total
capitalization ratio not to exceed 75%; c) EBITDA to debt service,
on a trailing four-quarter basis, to be no less than 1.10 to 1; and
d) a minimum net worth of $200,000 (with all terms as defined in
the credit facility). The credit facility also has a loan to value
maintenance covenant of 75%.
On February 10, 2009, the Company announced it had amended the
terms of its $800,000 credit facility agreement. Further details
are provided in note 15.
8. Related Party Transactions
CMA CGM is presented as a related party as it was, until the
merger, the parent company of Global Ship Lease, Inc. and at
December 31, 2008 is a significant shareholder of the Company,
owning certain Class A common shares representing a 23.9% voting
interest in the Company at and all 12,375,000 Class C common shares
which converted to Class A common shares on January 1, 2009.
Amounts due to CMA CGM companies are summarized as follows:
December 31, December 31,
2008 2007
Successor Predecessor
-------------------------------------------------------------------------
Shareholders' Loan - 5.25% per annum ((a) below) $- $176,875
Accrued related party expenses - 1,191
Current account ((b) below) 1,040 1,389
-------------------------------------------------------------------------
Amounts due to CMA CGM companies presented within
liabilities $1,040 $179,455
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Current account ((b) below) 958 -
-------------------------------------------------------------------------
Amounts due from CMA CGM companies presented
within assets $958 $-
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(a) Under a shareholder's loan agreement dated December 11,
2007, CMA CGM provided to the Predecessor a credit facility of
$250,000. The amount of the loan outstanding on August 14, 2008 of
$176,875 was cancelled upon completion of the merger (note 1). The
loan was unsecured and bore interest at 5.25% per annum.
(b) CMA CGM subsidiaries provide Global Ship Lease, Inc. and its
subsidiaries with certain ship management services related to the
operation of the Company's fleet. The current account at December
31, 2008 and 2007 related to amounts payable by or recoverable from
CMA CGM.
Asset Purchase Agreement
As reported in note 2, the Company entered into an asset
purchase agreement with CMA CGM on December 5, 2007. Pursuant to
this agreement, during December 2007, the Company purchased 10
secondhand vessels for a total price of $385,000 and in January
2008, the Company purchased two newly built vessels for a total
price of $188,000. In December 2008 the Company purchased four
vessels for a total price of $354,780 of which $99,000 was prepaid
by virtue of the 12,375,000 Class C common shares in the Company
issued to CMA CGM in the merger (note 3).
Under the asset purchase agreement, the Company is committed,
subject to financing, to purchasing a further vessel from CMA CGM
for a price of $82,000, with an expected purchase date of July
2009.
Time Charter Agreements
All 16 vessels owned during the period were time chartered to
CMA CGM. Of the three vessels due to be delivered during 2009 to
2010, one has been chartered to CMA CGM. Under the time charters,
hire is paid in advance and the daily rate is fixed for the
duration of the charter. The charters are for remaining periods of
between four and seventeen years. Of the $1,808,305 maximum future
charter hire receivable for the total fleet set out in note 9,
$1,665,113 relates to the 17 ships chartered or to be chartered to
CMA CGM (including the vessel due for delivery).
Ship Management Agreement
The Company outsources day to day technical management of its
vessels to a ship manager that is closely supervised by the
Company's own staff. The ship manager for the initial and
contracted fleet (excluding the two vessels to be purchased from
German interests) is CMA Ships Ltd, a wholly owned subsidiary of
CMA CGM. CMA CGM guarantees the performance of all services and any
payment due to the Company by the ship manager pursuant to the ship
management agreements. The ship management agreements are for a
period of three years from the date of delivery of the vessels to
Global Ship Lease, Inc. and its subsidiaries, although they can be
terminated early by the Company in certain circumstances.
The Company pays CMA Ships an annual management fee of $114 per
vessel and reimburses costs incurred on its behalf mainly being for
the provision of crew and lubricating oils and routine maintenance.
Such reimbursement is subject to a cap of between $5.4 and $8.8 per
day depending on the vessel. The impact of the cap is determined
quarterly and for the fleet as a whole. Ship management fees
expensed for the year ended December 31, 2008 amounted to $848 for
the Successor period and $528 for the Predecessor period (2007:
$49, 2006: $nil).
Except for transactions with CMA CGM, the Company did not enter
into any other related party transactions.
9. Commitments and Contingencies
Contracted Vessel Purchases
As reported in note 2, the Company has contracted to purchase a
further vessel from CMA CGM at a cost of $82,000. In addition, the
Company is committed to purchasing two vessels from German
interests in the fourth quarter of 2010 for approximately $77,000
each. A deposit of 10% has been paid for these two vessels.
Charter Hire Receivable
The Company has entered into long term charters for its vessels
owned at December 31, 2008. The charter hire (including those
relating to vessels due for delivery in 2009 and 2010), is paid in
advance and the daily rate is fixed for the duration of the
charter. The charters are for periods of between five and 17 years
and the maximum annual charter hire receivable for the fleet of 16
vessels as at December 31, 2008 and for the total contracted fleet
of 19 vessels, taking account of actual or anticipated delivery
dates and before allowance for any off-hire periods, is as
follows:
Fleet operated as at Total fleet to be
Year ending December 31 December 31, 2008 operated
---------------------------------------------------------------------
2009 $144,347 $150,110
2010 144,347 158,913
2011 144,347 177,197
2012 144,058 176,998
2013 and thereafter 938,891 1,145,087
---------------------------------------------------------------------
$1,515,990 $1,808,305
---------------------------------------------------------------------
10. Operating Segments
Segment information reported below has been prepared on the same
basis that it is reported internally to the Company's chief
operating decision maker. The Company operated under two business
models from which it derives its revenues reported within these
combined financial statements: (i) the provision of vessels by the
Company under time charters to container shipping companies and
(ii) freight revenues generated by the containerized transportation
of a broad range of industrial and consumer goods by the
Predecessor group. There are no transactions between reportable
segments. Following the delivery of the initial 12 vessels in
December 2007 and January 2008, the activity consists solely of the
ownership and provision of vessels for container shipping under
time charters.
The "Adjustment" column in the table below includes (i) the
elimination of the Containerized Transportation activity performed
by the Predecessor up to August 14, 2008 and (ii) the IPO and
merger costs expensed by the Predecessor.
During the three months and the years ended December 31, 2008
and 2007 the activities can be analyzed as follows:
Three months ended December 31,
-------------------------------------------------------------------------
2008 2007
Successor Predecessor
-------------------------------------------------------------------------
Time Time
Charter Charter Adjustment Total
-------------------------------------------------------------------------
Operating revenues 26,305 2,909 78,348 81,257
-------------------------------------------------------------------------
Operating expenses
Voyage expenses - - 60,173 60,173
Vessel operating
expenses 7,924 740 4,974 5,714
Depreciation 5,883 622 4,297 4,919
General and
administrative 2,686 330 8,184 8,514
Other operating
(income) expense (63) - 4,399 4,399
-------------------------------------------------------------------------
Total operating
expenses 16,430 1,692 82,027 83,719
-------------------------------------------------------------------------
Operating income
(expense) 9,875 1,217 (3,679) (2,462)
Interest income 195 - 207 207
Interest expense (2,647) (1,103) (3,692) (4,795)
Realised and
unrealised gain
on derivatives (50,986) - - -
-------------------------------------------------------------------------
Income (expense)
before income
taxes (43,563) 114 (7,164) (7,050)
Taxes on Income (92) (20) - (20)
-------------------------------------------------------------------------
Net income (expense) (43,655) 94 (7,164) (7,070)
-------------------------------------------------------------------------
August 15 to
December 31 2008 January 1 to August 14, 2008
-------------------------------------------------------------------------
Successor Predecessor
-------------------------------------------------------------------------
Time Time
Charter Charter Adjustment Total
-------------------------------------------------------------------------
Operating revenues 39,095 55,883 2,072 57,955
-------------------------------------------------------------------------
Operating expenses
Voyage expenses - - 1,944 1,944
Vessel operating
expenses 11,904 17,893 181 18,074
Depreciation 8,731 11,902 261 12,163
General and
administrative 3,712 2,306 1,508 3,814
Other operating
(income) expense (106) (187) 280 93
-------------------------------------------------------------------------
Total operating
expenses 24,241 31,914 4,174 36,088
-------------------------------------------------------------------------
Operating income
(expense) 14,854 23,969 (2,102) 21,867
Interest income 413 424 - 424
Interest expense (3,842) (17,600) - (17,600)
Realised and
unrealised gain on
derivatives (55,293) 2,749 - 2,749
-------------------------------------------------------------------------
Income (expense)
before income
taxes (43,868) 9,542 (2,102) 7,440
Taxes on Income (102) (23) - (23)
-------------------------------------------------------------------------
Net income (expense) (43,970) 9,519 (2,102) 7,417
-------------------------------------------------------------------------
Year ended December 31, 2007
-------------------------------------------------------------------------
Predecessor
-------------------------------------------------------------------------
Time
Charter Adjustment Total
-------------------------------------------------------------------------
Operating revenues 2,909 332,186 335,095
-------------------------------------------------------------------------
Operating expenses
Voyage expenses - 249,457 249,457
Vessel operating expenses 740 23,219 23,959
Depreciation 622 15,497 16,119
General and administrative 330 17,421 17,751
Other operating (income) expense - (2,341) (2,341)
-------------------------------------------------------------------------
Total operating expenses 1,692 303,253 304,945
-------------------------------------------------------------------------
Operating income (expense) 1,217 28,933 30,150
Interest income - - -
Interest expense (1,103) (12,251) (13,354)
Realised and unrealised gain on
derivatives - - -
-------------------------------------------------------------------------
Income (expense) before income taxes 114 16,682 16,796
Taxes on Income (20) - (20)
-------------------------------------------------------------------------
Net income (expense) 94 16,682 16,776
-------------------------------------------------------------------------
11. Share Capital
At December 31, 2008 the Company has three classes of common
shares. The rights of holders of Class B common shares are
identical to those of holders of Class A common shares, except that
the dividend rights of holders of Class B common shares are
subordinated to those of holders of Class A common shares until at
least the third quarter of 2011, and that Class B common share
holders are not entitled to dividends for any period prior to the
fourth quarter of 2008. The rights of holders of Class C common
shares are identical to those of holders of Class A common shares,
except that holders of Class C common shares are not entitled to
receive any dividends. The Class C common shares converted into
Class A common shares on a one-for-one basis on January 1,
2009.
The Series A preferred shares rank senior to the common shares
and are mandatorily redeemable on August 14, 2011 and are required
to be redeemed earlier using the proceeds of the exercise of any
Public Warrants. The shares are redeemed each time that proceeds
from the exercise of warrants reach $5,000. As at December 31, 2008
total proceeds received from the exercise of warrants classified in
the balance sheet as restricted cash were $3,026, and therefore
none of the preferred shares were redeemed. Series A preferred
shares are classified as a liability. The dividend that preferred
shares holders are entitled to receive quarterly is presented as
part of interest expense.
In addition to the Class A, B and C common shares and the Series
A Preferred shares, there are 39,531 Public Warrants which have an
expiry of August 14, 2010 and give the holder the right to purchase
one Class A common share at a price of $6 per share and 5,500
Sponsor Warrants which have similar terms to the Public Warrants
except that the exercise must be on a cashless basis. Further,
there are 6,188 Class A Warrants which expire on September 1, 2011
and give the holders the right to purchase one Class A common share
at a price of $9.25 per share.
On September 30, 2008 500,102 Public Warrants were exercised at
a price of $6 each and 500,102 Class A common shares issued.
On September 22, 2008 the Company's Board declared a starting
dividend of $0.23 per Class A common share that was paid on October
14, 2008 to Class A common shareholders and unit holders of record
on October 2, 2008.
On October 22, 2008, 4,400 Public Warrants were exercised at a
price of $6 each and 4,400 Class A common shares issued.
On November 13, 2008 the Company's Board declared a third
quarter dividend of $0.23 per Class A common share that was paid on
November 28, 2008 to Class A common shareholders and unit holders
of record as of November 21, 2008.
12. Interest Rate Derivatives and Fair Value Measurements
The Company is exposed to the impact of interest rate changes on
its variable rate debt. Accordingly, the Company enters into
interest rate swap agreements to manage the exposure to interest
rate variability.. As of December 31, 2008 a total of $580,000 of
anticipated core debt has been swapped into fixed rate debt at a
weighted average rate of 3.59% None of the Company's interest rate
agreements qualify for hedge accounting, therefore, the net changes
in the fair value of the interest rate derivative assets and
liabilities at each reporting period are reflected in the current
period operations as unrealized gains and losses on derivatives.
Cash flows related to interest rate derivatives (initial payments
of derivatives and periodic cash settlements) are included within
cash flows from investing activities in the combined statement of
cash flows. During the Predecessor period ended August 14, 2008,
initial payments on derivatives of $4,730 were made (nil for the
Successor period ended December 31, 2008).
Realized gains or losses from interest rate derivatives are
recognized in the statement of income concurrent with cash
settlements. In addition, the interest rate derivatives are "marked
to market" each reporting period to determine the fair values which
generate unrealized gains or losses. The unrealized loss on
interest rate derivatives for the year ended December 31, 2008 was
$51,770.
Effective January 1, 2008, the Company adopted SFAS No. 157,
"Fair Value Measurements" ("SFAS No. 157"). The fair value
hierarchy under SFAS No. 157 has three levels based on the
reliability of the inputs used to determine fair value as
follows:
Level 1. Observable inputs such as quoted prices in active
markets;
Level 2. Inputs, other than the quoted prices in active markets,
that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no
market data, which require the reporting entity to develop its own
assumptions.
The Company has determined that the only derivative instruments
that are measured at fair value on a recurring basis and are
categorized using the fair value hierarchy are its interest rate
swap agreements. These are all categorized as Level 2 and at
December 31, 2008 there was a liability of $47,041. The fair value
of the Company's derivative instruments is the estimated amount
that the Company would receive or pay to terminate the agreements
at the reporting date, taking into account interest rates at that
date.
13. Share-based compensation
In August 2008, the Company's Board adopted the 2008 Equity
Incentive Plan (the "Plan"), which entitles employees, consultants
and Directors of the Company and its subsidiaries to receive
options, stock appreciation rights, stock grants, stock units and
dividend equivalents.
The Plan is administered by the Board or a committee of the
Board. The maximum aggregate number of Class A common shares that
may be delivered pursuant to awards granted under the Plan during
the 10-year term of the Plan is 1,500,000. The maximum number of
Class A common shares with respect to which awards may be granted
to any participant in the Plan in any fiscal year is 500,000 per
participant.
The holder of a stock grant awarded under the Plan shall have
the same voting, dividend and other rights as the Company's other
Class A common shareholders when the grant vests and the shares are
issued.
On August 14, 2008 the Company granted a total of 780,000
restricted share units under the Plan to the Chief Executive
Officer, Chief Financial Officer and Chief Commercial Officer. The
shares vest over a period of three years; one third on the first
anniversary of the merger, one third on the second anniversary and
one third on the third anniversary.
On November 12, 2008 the Company granted 80,000 restricted share
units under the Plan to the Chief Technical Officer. The shares
vest over a period of two years; half on the first anniversary of
the merger and half on the second anniversary.
On November 12, 2008 the Company granted 37,671 restricted share
units under the Plan to the Directors of the Company which vested
on January 1, 2009.
The fair value of the restricted share units on issue is
calculated by multiplying the number of share units by the share
value at the grant date, which is discounted for dividends
forfeited over the vesting period.
There were no other awards granted by the Company during this
period. There were no share based compensation schemes in place in
the predecessor periods, and therefore no comparatives are
provided.
Share based awards are summarized as follows:
Restricted Stock Units
---------------------------------------------------------------------
Number of Weighted Average
Shares Fair Value
As at December 31, 2007 - -
Granted - August 14, 2008 780,000 $7.37
Granted - November 12, 2008 117,671 2.80
Vested - -
---------------------------------------------------------------------
---------------------------------------------------------------------
As at December 31, 2008 897,671 $6.77
---------------------------------------------------------------------
---------------------------------------------------------------------
The fair value at the grant dates are $7.37 for the grants on
August 14, 2008 and $2.80 for the grants on November 12, 2008, both
of which are the average closing prices for the common stock
surrounding those dates. The share values are discounted by 10.75%
(the same rate used to discount the Class C shares in the purchase
price allocation) and for the estimated $0.23 quarterly dividend
over the relevant vesting periods.
Using the graded vesting method of expensing the restricted
stock unit grants, the weighted average fair value of the shares
calculated thereon is recognized as compensation costs in the
income statement over the vesting period. During the period August
14, 2008 to December 31, 2008, the Company recognized a total of
$1,167 share based compensation costs (2007: Nil). As at December
31, 2008, there was a total of $3,363 unrecognized compensation
costs relating to the above share based awards (2007: Nil). The
remaining costs are expected to be recognized over a period of 34
months.
14. Earnings per share
Basic earnings per common share presented under the two-class
method is computed by dividing the earnings applicable to common
stockholders by the weighted average number of common shares
outstanding for the period. At December 31, 2008, there were
45,031,348 warrants to purchase Class A common shares outstanding,
including 5,500,000 sponsor warrants (which must be exercised on a
cashless basis), at an exercise price of $6, and there were 860,000
restricted stock units authorized as part of management's equity
incentive plan. As of December 31, 2008 only Class A and B common
shares are participating securities.
The diluted weighted average number of Class A common shares
outstanding as at December 31, 2008 is the same as the basic
weighted average number of shares. As there is a loss in the period
ended December 31, 2008 it is considered anti dilutive to include
instruments that convert to Class A common shares.
The Merger created 7,405,956 shares of Class B common shares.
Class B common shareholders were not entitled to receive dividends
in respect of income prior to the fourth quarter of 2008 and their
dividend rights is be subordinated to those of holders of Class A
common shares.
15. Subsequent events
(a) On February 10, 2009 the Company announced it had amended
the terms of its $800 million credit agreement. Under the
amendment, the maximum permitted loan to value maintenance ratio
will be increased to 100%, from 75% previously, applicable for test
dates in the period April 30, 2009 to April 30, 2010. During this
period, the Company will have no restrictions on its ability to
distribute dividends unless the loan to value ratio exceeds 90%, at
which point the Company will be required to place 50% of its
quarterly cash available for distribution in a pledged account. The
pledged account would be released back to the Company if loan to
value falls back below 90% during a subsequent valuation period. As
part of the amended facility, the Company has agreed to increase
the margin of interest paid on the existing loan to value pricing
grid by 50 basis points, and the grid has been extended to
accommodate higher loan to value ratios. The facility will now bear
an interest margin ranging from 1.25% to 2.75% over LIBOR,
depending on loan to value. In addition, the commitment fee will
increase to 0.50% from 0.25% and the maximum availability under the
credit facility will begin to amortize from December 2011 rather
than December 2012 previously.
(b) On February 10, 2009, the Company announced a fourth quarter
dividend of $0.23 per Class A common share, unit and Class B share
that will be paid on March 5, 2009 to Class A common shareholders
and unit holders and Class B shareholders of record as of February
20, 2009.
� As stated in note 11, the 12,375,000 Class C common shares
held by CMA CGM converted on a one for one basis to Class A common
shares on January 1, 2009.
Contacts: Investor and Media Contact: The IGB Group Tyler Wilson
646-673-9701
Global Ship Lease Ut (NYSE:GSL.U)
과거 데이터 주식 차트
부터 4월(4) 2024 으로 5월(5) 2024
Global Ship Lease Ut (NYSE:GSL.U)
과거 데이터 주식 차트
부터 5월(5) 2023 으로 5월(5) 2024
