UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: April 30, 2018
Commission File Number 001-34153
GLOBAL SHIP LEASE, INC.
(Exact name of Registrant as specified in its Charter)
c/o Portland House,
Stag Place,
London SWIE 5RS,
United Kingdom
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b)(1). Yes ☐ No ☒
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b)(7). Yes ☐ No ☒
Information Contained in this Form 6-K Report
Attached hereto as Exhibit I is a press release dated April 30, 2018 of Global Ship Lease, Inc. (the “Company”) reporting the Company’s financial results for the three months ended March 31, 2018. Attached hereto as Exhibit II are the Company’s interim unaudited consolidated financial statements for the three months ended March 31, 2018.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| GLOBAL SHIP LEASE, INC. | ||||||
| Date: April 30, 2018 | By: | /s/ Ian J. Webber | ||||
| Ian J. Webber | ||||||
| Chief Executive Officer | ||||||
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Exhibit I
Investor and Media Contacts:
The IGB Group
Bryan Degnan
646-673-9701
or
Leon Berman
212-477-8438
Global Ship Lease Reports Results for the First Quarter of 2018
LONDON, ENGLAND — April 30, 2018—Global Ship Lease, Inc. (NYSE:GSL) (the “Company”), a containership charter owner, announced today its unaudited results for the three months ended March 31, 2018.
First Quarter Highlights
| • | Reported operating revenues of $36.1 million for the first quarter 2018 |
| • | Reported net income for common shareholders for the first quarter 2018 of $4.2 million, the same as normalized net income |
| • | Generated $23.6 million of Adjusted EBITDA(1) for the first quarter 2018 |
| • | On February 20, 2018, announced agreement to an extension of our charter with OOCL for the OOCL Qingdao, a 2004-built, 8,063 TEU containership. The extension commences in direct continuation of the current charter with effect from March 11, 2018, at a fixed rate of $14,000 per day. Earliest redelivery is now January 1, 2019, with latest redelivery March 15, 2019 (at charterer’s option) |
| • | On March 1, 2018, announced agreement to acquire a 2005-built, 2,800 TEU containership for $11.3 million. Following delivery, which is expected to be during the second quarter of 2018, once the existing charter terminates, the vessel will commence charter employment with CMA CGM for a period of 12 months at a fixed rate of $9,000 per day. |
Ian Webber, Chief Executive Officer of Global Ship Lease, stated, “In the first quarter, we continued to maximize the value of our contract coverage with top-tier counterparties by maintaining full employment across our fleet of mid-sized and smaller containerships. As we have successfully extended charters that support our strong cashflows, we are beginning to capture the benefits of a marked strengthening that is underway in the market for mid-sized and smaller vessels. We have also returned to growth with our recently agreed acquisition of a 2,800 TEU feeder vessel at an attractive price with a pre-arranged charter to CMA CGM, demonstrating both the value of our close relationship with an industry leader and our confidence in the long-term dynamics of the mid-sized and smaller vessel classes.
Mr. Webber continued, “The long-term market trends driving the appreciation in mid-sized and smaller containerships continue to be robust, with limited vessel ordering, a strong global economy, and idle capacity of the global fleet at a very low level of less than 1.5%. As we continue to pursue attractive growth opportunities, we remain confident that Global Ship Lease’s track record of high-quality operations, our strong contracted charter coverage, and our stable balance sheet put us in an excellent position to create lasting shareholder value in a strengthening market.”
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SELECTED FINANCIAL DATA – UNAUDITED
(thousands of U.S. dollars)
| Three months ended March 31, 2018 |
Three months ended March 31, 2017 |
|||||||
| Operating Revenues |
36,102 | 39,642 | ||||||
| Operating Income |
15,491 | 18,434 | ||||||
| Net Income for common shareholders |
4,192 | 6,794 | ||||||
| Adjusted EBITDA (1) |
23,647 | 28,034 | ||||||
| Normalized Net Income (1) |
4,192 | 6,794 | ||||||
| (1) | Adjusted EBITDA and Normalized net income are non-US Generally Accepted Accounting Principles (US GAAP) measures, as explained further in this press release, and are considered by Global Ship Lease to be useful measures of its performance. Reconciliations of such non-GAAP measures to the most directly comparable US GAAP measure are provided in this Earnings Release. |
Operating Revenues and Utilization
The fleet generated operating revenues from fixed-rate time charters of $36.1 million in the three months ended March 31, 2018, down $3.5 million or 8.9% on operating revenues of $39.6 million for the comparative quarter in 2017. The reduction in revenue is mainly due to lower rates on the renewals of the charters of (i) the 2002-built Julie Delmas and the 2003-built Delmas Keta, effective September 2017, (ii) the 2005-built GSL Tianjin effective October 2017 and January 2018 and (iii) the 2004-built OOCL Qingdao effective March 2018, offset by 33 days less offhire, due mainly to fewer drydockings. There were 1,620 ownership days in the quarter, the same as in the comparative quarter. In the first quarter 2018, there were 17 days offhire, of which 13 were for a scheduled drydocking, giving an overall utilization of 99.0%. In the first quarter 2017, there were 50 days offhire, 47 of which were for three scheduled drydockings, giving an overall utilization of 96.9%.
The table below shows fleet utilization for the three months ended March 31, 2018 and 2017, and for the years ended December 31, 2017, 2016, 2015, 2014 and 2013.
| Three months ended | Year ended | |||||||||||||||||||||||||||
| Days |
Mar 31, 2018 |
Mar 31, 2017 |
Dec 31, 2017 |
Dec 31, 2016 |
Dec 31, 2015 |
Dec 31, 2014 |
Dec 31, 2013 |
|||||||||||||||||||||
| Ownership days |
1,620 | 1,620 | 6,570 | 6,588 | 6,893 | 6,270 | 6,205 | |||||||||||||||||||||
| Planned offhire—scheduled drydock |
(13 | ) | (47 | ) | (62 | ) | (100 | ) | (9 | ) | (48 | ) | (21 | ) | ||||||||||||||
| Unplanned offhire |
(4 | ) | (3 | ) | (40 | ) | (3 | ) | (7 | ) | (12 | ) | (7 | ) | ||||||||||||||
| Idle time |
0 | 0 | 0 | 0 | (13 | ) | (64 | ) | 0 | |||||||||||||||||||
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| Operating days |
1,603 | 1,570 | 6,468 | 6,485 | 6,864 | 6,146 | 6,177 | |||||||||||||||||||||
| Utilization |
99.0 | % | 96.9 | % | 98.4 | % | 98.4 | % | 99.6 | % | 98.0 | % | 99.5 | % | ||||||||||||||
There was one regulatory drydocking in the three months ended March 31, 2018; one further regulatory drydocking is planned for the year. There were four regulatory drydockings in 2017, three of which were in the first quarter.
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Vessel Operating Expenses
Vessel operating expenses, which include costs of crew, lubricating oil, spares and insurance, were $10.5 million for the three months ended March 31, 2018, up 1.1% from $10.4 million for the three months ended March 31, 2017. The average cost per ownership day for the three months ended March 31, 2018 was $6,498, an increase of $72 per day, or 1.1%, from $6,426 in the three months ended March 31, 2017. The increase is due to higher crew costs from a larger than normal number of crew changes offset by lower costs for insurance premiums and claim deductibles.
Depreciation
Depreciation for the three months ended March 31, 2018 was $8.2 million, compared to $9.6 million in the three months ended March 31, 2017, with the reduction due to the effect of lower book values for a number of vessels following impairment write downs in 2017.
Impairment
The Company’s accounting policies require that tangible fixed assets such as vessels are reviewed individually for impairment in case of trigger events or changes in circumstances to assess whether their carrying amounts are recoverable.
In January 2018, the Company agreed with CMA CGM to extend the charter on GSL Tianjin by eight to 12 months (at the charterer’s option) at a fixed rate of $11,900 per day, commencing January 26, 2018. In February 2018, the Company agreed with OOCL to extend the charter of OOCL Qingdao to between January 1, 2019 and March 15, 2019 (at the charterer’s option) at a fixed rate of $14,000 per day, commencing March 11, 2018. These extensions triggered the performance of an impairment test on the two vessels. No impairment was identified.
General and Administrative Costs
General and administrative costs incurred were $1.9 million in the three months ended March 31, 2018, compared to $1.2 million in the three months ended March 31, 2017. The increase is mainly due to higher staff costs and professional fees.
Other Operating Income
Other operating income in the three months ended March 31, 2018 was $6,000, compared to $42,000 for the three months ended March 31, 2017.
Adjusted EBITDA
As a result of the above, Adjusted EBITDA was $23.6 million for the three months ended March 31, 2018, down from $28.0 million for the three months ended March 31, 2017.
Interest Expense
Debt at March 31, 2018 totaled $414.8 million, comprising $360.0 million outstanding on our 9.875% notes due 2022 and $54.8 million under the new secured term loan, both of which were closed in October 2017 as part of a re-financing. The net proceeds, together with cash on hand, were used to refinance our previous 10.000% notes due 2019. In addition, all outstanding borrowings under both the previous revolving credit facility and the previous secured term loan were repaid and terminated.
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Debt at March 31, 2017 totaled $426.4 million, comprising $365.8 million outstanding on our previous 10.000% Notes, $39.2 million on the revolving credit facility and $21.4 million on the secured term loan.
Interest expense for the three months ended March 31, 2018, was $10.8 million, down $0.2 million on the interest expense for the three months ended March 31, 2017 of $11.0 million, mainly due to a slightly lower amount of bond outstanding and a slightly lower interest rate.
Interest income for the three months ended March 31, 2018 was $0.3 million and was $0.1 million for the three months ended March 31, 2017.
Taxation
Taxation for the three months ended March 31, 2018 and 2017 was not material.
Earnings Allocated to Preferred Shares
The Series B preferred shares, issued on August 20, 2014, carry a coupon of 8.75%, the cost of which for the three months ended March 31, 2018 was $0.8 million, the same as in the comparative quarter.
Net Income Available to Common Shareholders and Normalized Net Income
Net income available to common shareholders for the three months ended March 31, 2018 was $4.2 million. For the three months ended March 31, 2017, net income was $6.8 million. This year-over-year decrease is mainly due to lower revenue following charter renewals, offset by lower depreciation.
Normalized net income for the three months ended March 31, 2018 and 2017 was the same as that reported.
Fleet
The following table provides information about the on-the-water fleet of 18 vessels as at March 31, 2018. 16 vessels are chartered to CMA CGM, and two to OOCL.
| Vessel Name |
Capacity in TEUs (1) |
Year Built |
Purchase by GSL |
Remaining Charter Term (2) (years) |
Earliest Charter Expiry Date |
Daily Charter Rate $ |
||||||||||||||||||
| CMA CGM Matisse |
2,262 | 1999 | Dec 2007 | 1.7 | Sept 21, 2019 | 15,300 | ||||||||||||||||||
| CMA CGM Utrillo |
2,262 | 1999 | Dec 2007 | 1.7 | Sept 11, 2019 | 15,300 | ||||||||||||||||||
| Delmas Keta |
2,207 | 2003 | Dec 2007 | 0.5 | Aug 6, 2018 | 7,800 | ||||||||||||||||||
| Julie Delmas |
2,207 | 2002 | Dec 2007 | 0.4 | Jul 28, 2018 | 7,800 | ||||||||||||||||||
| Kumasi |
2,207 | 2002 | Dec 2007 | 0.8 - 2.8 | (3) | Nov 16, 2018 | 9,800 | |||||||||||||||||
| Marie Delmas |
2,207 | 2002 | Dec 2007 | 0.8 - 2.8 | (3) | Nov 16, 2018 | 9,800 | |||||||||||||||||
| CMA CGM La Tour |
2,272 | 2001 | Dec 2007 | 1.7 | Sept 20, 2019 | 15,300 | ||||||||||||||||||
| CMA CGM Manet |
2,272 | 2001 | Dec 2007 | 1.7 | Sept 7, 2019 | 15,300 | ||||||||||||||||||
| CMA CGM Alcazar |
5,089 | 2007 | Jan 2008 | 2.8 | Oct 18, 2020 | 33,750 | ||||||||||||||||||
| CMA CGM Château d’If |
5,089 | 2007 | Jan 2008 | 2.8 | Oct 11, 2020 | 33,750 | ||||||||||||||||||
| CMA CGM Thalassa |
11,040 | 2008 | Dec 2008 | 7.8 | Oct 1, 2025 | 47,200 | ||||||||||||||||||
| CMA CGM Jamaica |
4,298 | 2006 | Dec 2008 | 4.7 | Sept 17, 2022 | 25,350 | ||||||||||||||||||
| CMA CGM Sambhar |
4,045 | 2006 | Dec 2008 | 4.7 | Sept 16, 2022 | 25,350 | ||||||||||||||||||
| CMA CGM America |
4,045 | 2006 | Dec 2008 | 4.7 | Sept 19, 2022 | 25,350 | ||||||||||||||||||
| CMA CGM Berlioz |
6,621 | 2001 | Aug 2009 | 3.4 | May 28, 2021 | 34,000 | ||||||||||||||||||
| GSL Tianjin(4) |
8,063 | 2005 | Oct 2014 | 0.7 | Sept 26, 2018 | 11,900 | ||||||||||||||||||
| OOCL Qingdao(5) |
8,063 | 2004 | Mar 2015 | 0.9 | Jan 1, 2019 | 14,000 | ||||||||||||||||||
| OOCL Ningbo |
8,063 | 2004 | Sep 2015 | 0.6 | Sep 17, 2018 | 34,500 | ||||||||||||||||||
Page 4
| (1) | Twenty-foot Equivalent Units. |
| (2) | As at March 31, 2018 to mid-point of re-delivery period, updated for subsequent charter extensions. Plus or minus 90 days, other than (i) Julie Delmas and Delmas Keta which are plus or minus 45 days, (ii) Kumasi and Marie Delmas see footnote 3 below, (iii) GSL Tianjin which is now between September 26, 2018 and January 26, 2019 see footnote 4 below, (iv) OOCL Qingdao which is now between January 1, 2019 and March 15, 2019 see footnote 5 below and (v) OOCL Ningbo which is between September 17, 2018 and December 17, 2018, all at charterer’s option. |
| (3) | The charters for Kumasi and Marie Delmas were amended in July 2016 to, inter alia, provide us with three consecutive options to extend the charters at $9,800 per day. The first of these options was exercised in July 2017, extending the charters to end 2018. The two remaining options allow us to extend the charters to December 31, 2020 plus or minus 90 days at charterer’s option. The earliest possible re-delivery date, not taking into account our remaining options, is shown in the table. |
| (4) | The time charter for GSL Tianjin with CMA CGM which commenced October 25, 2017,was extended with effect from January 26, 2018 at a fixed rate of $11,900 per day for a period of eight to 12 months, at charterer’s option. |
| (5) | In February 2018 we agreed to an extension of our charter with OOCL for the OOCL Qingdao. The extension commenced in direct continuation of the current charter with effect from March 11, 2018, at a fixed rate of $14,000 per day. Earliest redelivery is now January 1, 2019, with latest redelivery March 15, 2019, at charterer’s option. . |
Conference Call and Webcast
Global Ship Lease will hold a conference call to discuss the Company’s results for the three months ended March 31, 2018 today, Monday April 30, 2018 at 10:30 a.m. Eastern Time. There are two ways to access the conference call:
(1) Dial-in: (877) 445-2556 or (908) 982-4670; Passcode: 1597213 Please dial in at least 10 minutes prior to 10:30 a.m. Eastern Time to ensure a prompt start to the call.
(2) Live Internet webcast and slide presentation: http://www.globalshiplease.com
If you are unable to participate at this time, a replay of the call will be available through Wednesday, May 16, 2018 at (855) 859-2056 or (404) 537-3406. Enter the code 1597213 to access the audio replay. The webcast will also be archived on the Company’s website: http://www.globalshiplease.com.
Annual Report on Form 20-F
Global Ship Lease, Inc has filed its Annual Report for 2017 with the Securities and Exchange Commission. A copy of the report can be found under the Investor Relations section (Annual Reports) of the Company’s website at http://www.globalshiplease.com. Shareholders may request a hard copy of the audited financial statements free of charge by contacting the Company at info@globalshiplease.com or by writing to Global Ship Lease, Inc, care of Global Ship Lease Services Limited, Portland House, Stag Place, London SW1E 5RS or by telephoning +44 (0) 207 869 8006.
About Global Ship Lease
Global Ship Lease is a containership charter owner. Incorporated in the Marshall Islands, Global Ship Lease commenced operations in December 2007 with a business of owning and chartering out containerships under long-term, fixed rate charters to top tier container liner companies.
At March 31, 2018, Global Ship Lease owned 18 vessels with a total capacity of 82,312 TEU and an average age, weighted by TEU capacity, of 13.3 years. All vessels are currently fixed on time charters, 15 with CMA CGM. The average remaining term of the charters is 2.6 years or 2.9 years on a weighted basis.
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Reconciliation of Non-U.S. GAAP Financial Measure
A. ADJUSTED EBITDA
Adjusted EBITDA represents net income before interest income and expense including amortization of deferred finance costs, earnings allocated to preferred shares, income taxes, depreciation, amortization and impairment. Adjusted EBITDA is a non-US GAAP quantitative measure used to assist in the assessment of the Company’s ability to generate cash from its operations. We believe that the presentation of Adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Adjusted EBITDA is not defined in US GAAP and should not be considered to be an alternate to Net income or any other financial metric required by such accounting principles. Our use of Adjusted EBITDA may vary from the use of similarly titled measures by others in our industry.
ADJUSTED EBITDA – UNAUDITED
(thousands of U.S. dollars)
| Three months ended Mar 31, 2018 |
Three months ended Mar 31, 2017 |
|||||||
| Net income available to common shareholders |
4,192 | 6,794 | ||||||
| Adjust: Depreciation |
8,156 | 9,600 | ||||||
| Interest income |
(269 | ) | (93 | ) | ||||
| Interest expense |
10,787 | 10,957 | ||||||
| Income tax |
15 | 10 | ||||||
| Earnings allocated to preferred shares |
766 | 766 | ||||||
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|
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| Adjusted EBITDA |
23,647 | 28,034 | ||||||
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B. Normalized net income
Normalized net income represents net income adjusted for the premium paid on the tender offer for the Notes and the gain made on open market purchases of the Notes, together with the related accelerated amortization of deferred financing costs and original issue discount, and for impairment charges. Normalized net income is a non-GAAP quantitative measure which we believe will assist investors and analysts who often adjust reported net income for non-operating items that do not affect operating performance or operating cash generated. Normalized net income is not defined in US GAAP and should not be considered to be an alternate to net income or any other financial metric required by such accounting principles. Our use of Normalized net income may vary from the use of similarly titled measures by others in our industry.
There are no differences between Reported Net Income and Normalized Net Income for the quarters ended March 31, 2017 and 2018.
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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 future growth of the container shipping industry, including the rates of annual demand and supply growth; |
| • | the financial condition of CMA CGM (the company’s principal charterer and main source of operating revenues) and other charterers and their ability to pay charterhire in accordance with the charters; |
| • | the overall health and condition of the U.S. and global financial markets; |
| • | Global Ship Lease’s financial condition and liquidity, including its ability to obtain additional financing to fund capital expenditures, vessel acquisitions and for other general corporate purposes and its ability to meet its financial covenants and repay its borrowings; |
| • | Global Ship Lease’s expectations relating to dividend payments and forecasts of its ability to make such payments including the availability of cash and the impact of constraints under its first priority secured notes; |
| • | future acquisitions, business strategy and expected capital spending; |
| • | operating expenses, availability of key employees, crew, number of off-hire days, drydocking and survey requirements, costs of regulatory compliance, insurance costs and general and administrative costs; |
| • | general market conditions and shipping industry trends, including charter rates and factors affecting supply and demand; |
| • | assumptions regarding interest rates and inflation; |
| • | change in the rate of growth of global and various regional economies; |
| • | risks incidental to vessel operation, including piracy, discharge of pollutants and vessel accidents and damage including total or constructive total loss; |
| • | estimated future capital expenditures needed to preserve Global Ship Lease’s capital base; |
| • | Global Ship Lease’s expectations about the availability of vessels to purchase, the time that it may take to construct new vessels, or the useful lives of its vessels; |
| • | Global Ship Lease’s continued ability to enter into or renew charters including the re-chartering of vessels on the expiry of existing charters, or to secure profitable employment for its vessels in the spot market; |
| • | the continued performance of existing charters; |
| • | Global Ship Lease’s ability to capitalize on management’s and 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
Page 7
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.
Page 8
Global Ship Lease, Inc.
Interim Unaudited Consolidated Statements of Cash Flows
(Expressed in thousands of U.S. dollars except share data)
| Three months ended March 31, |
||||||||
| 2018 | 2017 | |||||||
| Operating Revenues |
||||||||
| Time charter revenue |
$ | 5,726 | $ | 9,238 | ||||
| Time charter revenue – related party |
30,376 | 30,404 | ||||||
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| 36,102 | 39,642 | |||||||
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| Operating Expenses |
||||||||
| Vessel operating expenses |
10,204 | 10,010 | ||||||
| Vessel operating expenses – related party |
322 | 400 | ||||||
| Depreciation |
8,156 | 9,600 | ||||||
| General and administrative |
1,935 | 1,240 | ||||||
| Other operating income |
(6 | ) | (42 | ) | ||||
|
|
|
|
|
|||||
| Total operating expenses |
20,611 | 21,208 | ||||||
|
|
|
|
|
|||||
| Operating Income |
15,491 | 18,434 | ||||||
| Non Operating Income (Expense) |
||||||||
| Interest income |
269 | 93 | ||||||
| Interest expense |
(10,787 | ) | (10,957 | ) | ||||
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|
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| Income before Income Taxes |
4,973 | 7,570 | ||||||
| Income taxes |
(15 | ) | (10 | ) | ||||
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|
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|
|||||
| Net Income |
$ | 4,958 | $ | 7,560 | ||||
| Earnings allocated to Series B Preferred Shares |
(766 | ) | (766 | ) | ||||
|
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|
|
|
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| Net Income available to Common Shareholders |
$ | 4,192 | $ | 6,794 | ||||
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| Earnings per Share |
||||||||
| Weighted average number of Class A common shares outstanding |
||||||||
| Basic (including RSUs without service conditions) |
48,009,734 | 47,975,609 | ||||||
| Diluted |
48,009,734 | 47,975,609 | ||||||
| Net income per Class A common share |
||||||||
| Basic (including RSUs without service conditions) |
$ | 0.09 | $ | 0.14 | ||||
| Diluted |
$ | 0.09 | $ | 0.14 | ||||
| Weighted average number of Class B common shares outstanding |
||||||||
| Basic and diluted |
7,405,956 | 7,405,956 | ||||||
| Net income per Class B common share |
||||||||
| Basic and diluted |
$ | nil | $ | nil | ||||
Page 9
Global Ship Lease, Inc.
Interim Unaudited Consolidated Balance Sheets
(Expressed in thousands of U.S. dollars except share data)
| March 31, 2018 |
December 31, 2017 |
|||||||
| Assets |
||||||||
| Cash and cash equivalents |
$ | 91,288 | $ | 73,266 | ||||
| Accounts receivable |
— | 72 | ||||||
| Due from related party |
756 | 1,932 | ||||||
| Prepaid expenses |
2,244 | 918 | ||||||
| Other receivables |
292 | 458 | ||||||
| Inventory |
2,525 | 742 | ||||||
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|
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| Total current assets |
97,105 | 77,388 | ||||||
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| Vessels in operation |
590,845 | 597,779 | ||||||
| Vessel deposits |
1,128 | — | ||||||
| Other fixed assets |
8 | 10 | ||||||
| Intangible assets |
5 | 7 | ||||||
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| Total non-current assets |
591,986 | 597,796 | ||||||
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| Total Assets |
$ | 689,091 | $ | 675,184 | ||||
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| Liabilities and Stockholders’ Equity |
||||||||
| Liabilities |
||||||||
| Current portion of long term debt |
$ | 40,000 | $ | 40,000 | ||||
| Intangible liability – charter agreements |
1,771 | 1,771 | ||||||
| Deferred revenue |
1,866 | 2,178 | ||||||
| Accounts payable |
726 | 1,486 | ||||||
| Due to related party |
3,923 | 2,813 | ||||||
| Accrued expenses |
17,398 | 8,788 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
65,684 | 57,036 | ||||||
|
|
|
|
|
|||||
| Long term debt |
359,745 | 358,515 | ||||||
| Intangible liability – charter agreements |
7,568 | 8,011 | ||||||
| Deferred tax liability |
20 | 17 | ||||||
|
|
|
|
|
|||||
| Total long-term liabilities |
367,333 | 365,543 | ||||||
|
|
|
|
|
|||||
| Total Liabilities |
$ | 433,017 | $ | 423,579 | ||||
|
|
|
|
|
|||||
| Commitments and contingencies |
— | — | ||||||
| Stockholders’ Equity |
||||||||
| Class A Common stock – authorized |
$ | 476 | $ | 476 | ||||
| Class B Common stock – authorized |
74 | 74 | ||||||
| Series B Preferred shares – authorized |
— | — | ||||||
| Additional paid in capital |
387,025 | 386,748 | ||||||
| Accumulated deficit |
(131,501 | ) | (135,693 | ) | ||||
|
|
|
|
|
|||||
| Total Stockholders’ Equity |
256,074 | 251,605 | ||||||
|
|
|
|
|
|||||
| Total Liabilities and Stockholders’ Equity |
$ | 689,091 | $ | 675,184 | ||||
|
|
|
|
|
|||||
Page 10
Global Ship Lease, Inc.
Interim Unaudited Consolidated Statements of Cash Flows
(Expressed in thousands of U.S. dollars)
| Three months ended March 31, |
||||||||
| 2018 | 2017 | |||||||
| Cash Flows from Operating Activities |
||||||||
| Net income |
$ | 4,958 | $ | 7,560 | ||||
| Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities |
||||||||
| Depreciation |
8,156 | 9,600 | ||||||
| Amortization of deferred financing costs |
1,029 | 890 | ||||||
| Amortization of original issue discount |
201 | 282 | ||||||
| Amortization of intangible liability |
(443 | ) | (452 | ) | ||||
| Share based compensation |
45 | — | ||||||
| (Increase) in accounts receivable and other assets |
(1,104 | ) | (581 | ) | ||||
| (Increase) in inventory |
(1,783 | ) | (48 | ) | ||||
| Increase (decrease) in accounts payable and other liabilities |
7,850 | (9,548 | ) | |||||
| (Decrease) increase in unearned revenue |
(312 | ) | 428 | |||||
| Increase in related party balances |
1,838 | 48 | ||||||
| Unrealized foreign exchange loss |
4 | 6 | ||||||
|
|
|
|
|
|||||
| Net Cash Provided by Operating Activities |
20,439 | 8,185 | ||||||
|
|
|
|
|
|||||
| Cash Flows from Investing Activities |
||||||||
| Cash paid for vessel deposits |
(1,128 | ) | — | |||||
| Improvement of vessels |
(150 | ) | — | |||||
| Cash paid for drydockings |
(373 | ) | (1,720 | ) | ||||
|
|
|
|
|
|||||
| Net Cash Used in Investing Activities |
(1,651 | ) | (1,720 | ) | ||||
|
|
|
|
|
|||||
| Cash Flows from Financing Activities |
||||||||
| Repayment of credit facilities |
— | (2,925 | ) | |||||
| Series B Preferred Shares – dividends paid |
(766 | ) | (766 | ) | ||||
|
|
|
|
|
|||||
| Net Cash (Used in) by Financing Activities |
(766 | ) | (3,691 | ) | ||||
|
|
|
|
|
|||||
| Net Increase in Cash and Cash Equivalents |
18,022 | 2,774 | ||||||
| Cash and Cash Equivalents at Start of Period |
73,266 | 54,243 | ||||||
|
|
|
|
|
|||||
| Cash and Cash Equivalents at End of Period |
$ | 91,288 | $ | 57,017 | ||||
|
|
|
|
|
|||||
| Supplemental information |
||||||||
| Total interest paid |
$ | 648 | $ | 18,932 | ||||
| Income tax paid |
$ | 12 | $ | 14 | ||||
|
|
|
|
|
|||||
Page 11
Exhibit II
GLOBAL SHIP LEASE, INC.
INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2018
Global Ship Lease, Inc.
Interim Unaudited Consolidated Balance Sheets
(Expressed in thousands of U.S. dollars except share data)
| March 31, 2018 |
December 31, 2017 |
|||||||||||
| Note | ||||||||||||
| Assets |
||||||||||||
| Cash and cash equivalents |
$ | 91,288 | $ | 73,266 | ||||||||
| Accounts receivable |
— | 72 | ||||||||||
| Due from related party |
7 | 756 | 1,932 | |||||||||
| Prepaid expenses |
2,244 | 918 | ||||||||||
| Other receivables |
292 | 458 | ||||||||||
| Inventory |
2,525 | 742 | ||||||||||
|
|
|
|
|
|||||||||
| Total current assets |
97,105 | 77,388 | ||||||||||
|
|
|
|
|
|||||||||
| Vessels in operation |
4 | 590,845 | 597,779 | |||||||||
| Vessel deposits |
5 | 1,128 | — | |||||||||
| Other fixed assets |
8 | 10 | ||||||||||
| Intangible assets |
5 | 7 | ||||||||||
|
|
|
|
|
|||||||||
| Total non-current assets |
591,986 | 597,796 | ||||||||||
|
|
|
|
|
|||||||||
| Total Assets |
$ | 689,091 | $ | 675,184 | ||||||||
|
|
|
|
|
|||||||||
| Liabilities and Stockholders’ Equity |
||||||||||||
| Liabilities |
||||||||||||
| Current portion of long term debt |
6 | $ | 40,000 | $ | 40,000 | |||||||
| Intangible liability – charter agreements |
1,771 | 1,771 | ||||||||||
| Deferred revenue |
1,866 | 2,178 | ||||||||||
| Accounts payable |
726 | 1,486 | ||||||||||
| Due to related party |
7 | 3,923 | 2,813 | |||||||||
| Accrued expenses |
17,398 | 8,788 | ||||||||||
|
|
|
|
|
|||||||||
| Total current liabilities |
65,684 | 57,036 | ||||||||||
|
|
|
|
|
|||||||||
| Long term debt |
6 | 359,745 | 358,515 | |||||||||
| Intangible liability – charter agreements |
7,568 | 8,011 | ||||||||||
| Deferred tax liability |
20 | 17 | ||||||||||
|
|
|
|
|
|||||||||
| Total long-term liabilities |
367,333 | 365,543 | ||||||||||
|
|
|
|
|
|||||||||
| Total Liabilities |
$ | 433,017 | $ | 423,579 | ||||||||
|
|
|
|
|
|||||||||
| Commitments and contingencies |
8 | — | — | |||||||||
| Stockholders’ Equity |
||||||||||||
| Class A Common stock – authorized |
9 | $ | 476 | $ | 476 | |||||||
| Class B Common stock – authorized |
9 | 74 | 74 | |||||||||
| Series B Preferred shares – authorized |
9 | — | — | |||||||||
| Additional paid in capital |
387,025 | 386,748 | ||||||||||
| Accumulated deficit |
(131,501 | ) | (135,693 | ) | ||||||||
|
|
|
|
|
|||||||||
| Total Stockholders’ Equity |
256,074 | 251,605 | ||||||||||
|
|
|
|
|
|||||||||
| Total Liabilities and Stockholders’ Equity |
$ | 689,091 | $ | 675,184 | ||||||||
|
|
|
|
|
|||||||||
See accompanying notes to interim unaudited consolidated financial statements
Page 1
Global Ship Lease, Inc.
Interim Unaudited Consolidated Statements of Income
(Expressed in thousands of U.S. dollars except share data)
| Three months ended March 31, |
||||||||||||
| 2018 | 2017 | |||||||||||
| Note | ||||||||||||
| Operating Revenues |
||||||||||||
| Time charter revenue |
$ | 5,726 | $ | 9,238 | ||||||||
| Time charter revenue – related party |
7 | 30,376 | 30,404 | |||||||||
|
|
|
|
|
|||||||||
| 36,102 | 39,642 | |||||||||||
|
|
|
|
|
|||||||||
| Operating Expenses |
||||||||||||
| Vessel operating expenses |
10,204 | 10,010 | ||||||||||
| Vessel operating expenses – related party |
7 | 322 | 400 | |||||||||
| Depreciation |
4 | 8,156 | 9,600 | |||||||||
| General and administrative |
1,935 | 1,240 | ||||||||||
| Other operating income |
(6 | ) | (42 | ) | ||||||||
|
|
|
|
|
|||||||||
| Total operating expenses |
20,611 | 21,208 | ||||||||||
|
|
|
|
|
|||||||||
| Operating Income |
15,491 | 18,434 | ||||||||||
| Non Operating Income (Expense) |
||||||||||||
| Interest income |
269 | 93 | ||||||||||
| Interest expense |
(10,787 | ) | (10,957 | ) | ||||||||
|
|
|
|
|
|||||||||
| Income before Income Taxes |
4,973 | 7,570 | ||||||||||
| Income taxes |
(15 | ) | (10 | ) | ||||||||
|
|
|
|
|
|||||||||
| Net Income |
$ | 4,958 | $ | 7,560 | ||||||||
| Earnings allocated to Series B Preferred Shares |
9 | (766 | ) | (766 | ) | |||||||
|
|
|
|
|
|||||||||
| Net Income available to Common Shareholders |
$ | 4,192 | $ | 6,794 | ||||||||
|
|
|
|
|
|||||||||
| Earnings per Share |
||||||||||||
| Weighted average number of Class A common shares outstanding |
||||||||||||
| Basic (including RSUs without service conditions) |
11 | 48,009,734 | 47,975,609 | |||||||||
| Diluted |
11 | 48,009,734 | 47,975,609 | |||||||||
| Net income per Class A common share |
||||||||||||
| Basic (including RSUs without service conditions) |
11 | $ | 0.09 | $ | 0.14 | |||||||
| Diluted |
11 | $ | 0.09 | $ | 0.14 | |||||||
| Weighted average number of Class B common shares outstanding |
||||||||||||
| Basic and diluted |
11 | 7,405,956 | 7,405,956 | |||||||||
| Net income per Class B common share |
||||||||||||
| Basic and diluted |
11 | $ | nil | $ | nil | |||||||
See accompanying notes to interim unaudited consolidated financial statements
Page 2
Global Ship Lease, Inc.
Interim Unaudited Consolidated Statements of Cash Flows
(Expressed in thousands of U.S. dollars)
| Three months ended March 31, |
||||||||||||
| 2018 | 2017 | |||||||||||
| Note | ||||||||||||
| Cash Flows from Operating Activities |
||||||||||||
| Net income |
$ | 4,958 | $ | 7,560 | ||||||||
| Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities |
||||||||||||
| Depreciation |
4 | 8,156 | 9,600 | |||||||||
| Amortization of deferred financing costs |
6 | 1,029 | 890 | |||||||||
| Amortization of original issue discount |
6 | 201 | 282 | |||||||||
| Amortization of intangible liability |
(443 | ) | (452 | ) | ||||||||
| Share based compensation |
10 | 45 | — | |||||||||
| (Increase) in accounts receivable and other assets |
(1,104 | ) | (581 | ) | ||||||||
| (Increase) in inventory |
(1,783 | ) | (48 | ) | ||||||||
| Increase (decrease) in accounts payable and other liabilities |
7,850 | (9,548 | ) | |||||||||
| (Decrease) increase in unearned revenue |
(312 | ) | 428 | |||||||||
| Increase in related party balances |
7 | 1,838 | 48 | |||||||||
| Unrealized foreign exchange loss |
4 | 6 | ||||||||||
|
|
|
|
|
|||||||||
| Net Cash Provided by Operating Activities |
20,439 | 8,185 | ||||||||||
|
|
|
|
|
|||||||||
| Cash Flows from Investing Activities |
||||||||||||
| Cash paid for vessel deposits |
5 | (1,128 | ) | — | ||||||||
| Improvement of vessels |
(150 | ) | — | |||||||||
| Cash paid for drydockings |
(373 | ) | (1,720 | ) | ||||||||
|
|
|
|
|
|||||||||
| Net Cash Used in Investing Activities |
(1,651 | ) | (1,720 | ) | ||||||||
|
|
|
|
|
|||||||||
| Cash Flows from Financing Activities |
||||||||||||
| Repayment of credit facilities |
6 | — | (2,925 | ) | ||||||||
| Series B Preferred Shares – dividends paid |
9 | (766 | ) | (766 | ) | |||||||
|
|
|
|
|
|||||||||
| Net Cash (Used in) Provided by Financing Activities |
(766 | ) | (3,691 | ) | ||||||||
|
|
|
|
|
|||||||||
| Net Increase (Decrease) in Cash and Cash Equivalents |
18,022 | 2,774 | ||||||||||
| Cash and Cash Equivalents at Start of Period |
73,266 | 54,243 | ||||||||||
|
|
|
|
|
|||||||||
| Cash and Cash Equivalents at End of Period |
$ | 91,288 | $ | 57,017 | ||||||||
|
|
|
|
|
|||||||||
| Supplemental information |
||||||||||||
| Total interest paid |
$ | 648 | $ | 18,932 | ||||||||
| Income tax paid |
$ | 12 | $ | 14 | ||||||||
|
|
|
|
|
|||||||||
See accompanying notes to interim unaudited consolidated financial statements
Page 3
Global Ship Lease, Inc.
Interim Unaudited Consolidated Statements of Changes in Stockholders’ Equity
(Expressed in thousands of U.S. dollars except share data)
| Number of Common Stock at $0.01 Par value |
Number of Series B Preferred Shares at $0.01 Par value |
Common Stock |
Series B Preferred Shares |
Additional Paid in Capital |
Accumulated Deficit |
Stockholders’ Equity |
||||||||||||||||||||||
| Balance at January 1, 2017 |
54,981,565 | 14,000 | $ | 550 | $ | — | $ | 386,708 | $ | (58,365 | ) | $ | 328,893 | |||||||||||||||
| Restricted Stock Units (note 10) |
— | — | — | — | 40 | — | 40 | |||||||||||||||||||||
| Class A common shares issued (note 9) |
34,125 | — | — | — | — | — | — | |||||||||||||||||||||
| Net loss for the period |
— | — | — | — | — | (74,266 | ) | (74,266 | ) | |||||||||||||||||||
| Series B Preferred Shares dividend (note 9) |
— | — | — | — | — | (3,062 | ) | (3,062 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balance at December 31, 2017 |
55,015,690 | 14,000 | $ | 550 | $ | — | $ | 386,748 | $ | (135,693 | ) | $ | 251,605 | |||||||||||||||
| Restricted Stock Units (note 10) |
— | — | — | — | 277 | — | 277 | |||||||||||||||||||||
| Net income for the period |
— | — | — | — | — | 4,958 | 4,958 | |||||||||||||||||||||
| Series B Preferred Shares dividend (note 9) |
— | — | — | — | — | (766 | ) | (766 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balance at March 31, 2018 |
55,015,690 | 14,000 | $ | 550 | $ | — | $ | 387,025 | $ | (131,501 | ) | $ | 256,074 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
See accompanying notes to interim unaudited consolidated financial statements
Page 4
Global Ship Lease, Inc.
Notes to the Interim Unaudited Consolidated Financial Statements
(Expressed in thousands of U.S. dollars)
| 1. | General |
On August 14, 2008, Global Ship Lease, Inc. (the “Company” or “GSL”) merged indirectly with Marathon Acquisition Corp. (“Marathon”), a company then listed on The American Stock Exchange. Following the merger, the Company became listed on the New York Stock Exchange on August 15, 2008.
| 2. | Nature of Operations and Basis of Preparation |
(a) Nature of Operations
The Global Ship Lease group owns and charters out containerships. As of March 31, 2018, the group owned 18 vessels; 16 were time chartered to CMA CGM and two to Orient Overseas Container Lines with remaining charter periods ranging from 0.4 to 7.8 years.
The following table provides information about the 18 vessels owned as at March 31, 2018:
| Vessel Name |
Capacity in TEUs (1) |
Year Built |
Purchase Date by GSL |
Charterer | Charter Remaining Duration (years) (2) |
Daily Charter Rate |
||||||||||||
| CMA CGM Matisse |
2,262 | 1999 | December 2007 | CMA CGM | 1.7 | $ | 15.300 | |||||||||||
| CMA CGM Utrillo |
2,262 | 1999 | December 2007 | CMA CGM | 1.7 | $ | 15.300 | |||||||||||
| Delmas Keta |
2,207 | 2003 | December 2007 | CMA CGM | 0.5 | $ | 7.800 | |||||||||||
| Julie Delmas |
2,207 | 2002 | December 2007 | CMA CGM | 0.4 | $ | 7.800 | |||||||||||
| Kumasi (3) |
2,207 | 2002 | December 2007 | CMA CGM | 2.8 | $ | 9.800 | |||||||||||
| Marie Delmas (3) |
2,207 | 2002 | December 2007 | CMA CGM | 2.8 | $ | 9.800 | |||||||||||
| CMA CGM La Tour |
2,272 | 2001 | December 2007 | CMA CGM | 1.7 | $ | 15.300 | |||||||||||
| CMA CGM Manet |
2,272 | 2001 | December 2007 | CMA CGM | 1.7 | $ | 15.300 | |||||||||||
| CMA CGM Alcazar |
5,089 | 2007 | January 2008 | CMA CGM | 2.8 | $ | 33.750 | |||||||||||
| CMA CGM Château d’lf |
5,089 | 2007 | January 2008 | CMA CGM | 2.8 | $ | 33.750 | |||||||||||
| CMA CGM Thalassa |
11,040 | 2008 | December 2008 | CMA CGM | 7.8 | $ | 47.200 | |||||||||||
| CMA CGM Jamaica |
4,298 | 2006 | December 2008 | CMA CGM | 4.7 | $ | 25.350 | |||||||||||
| CMA CGM Sambhar |
4,045 | 2006 | December 2008 | CMA CGM | 4.7 | $ | 25.350 | |||||||||||
| CMA CGM America |
4,045 | 2006 | December 2008 | CMA CGM | 4.7 | $ | 25.350 | |||||||||||
| CMA CGM Berlioz |
6,621 | 2001 | August 2009 | CMA CGM | 3.4 | $ | 34.000 | |||||||||||
| GSL Tianjin (4) |
8,063 | 2005 | October 2014 | CMA CGM | 0.7 | $ | 11.900 | |||||||||||
| OOCL Qingdao (5) |
8,063 | 2004 | March 2015 | OOCL | 0.9 | $ | 14.000 | |||||||||||
| OOCL Ningbo |
8,063 | 2004 | September 2015 | OOCL | 0.6 | $ | 34.500 | |||||||||||
| (1) | Twenty-foot Equivalent Units. |
| (2) | As at March 31, 2018 to mid-point of re-delivery period, updated for subsequent charter extensions. Plus or minus 90 days, other than (i) Julie Delmas and Delmas Keta which are plus or minus 45 days, (ii) Kumasi and Marie Delmas see footnote 3 below, (iii) GSL Tianjin which is now between September 26, 2018 and January 26, 2019 see footnote 4 below, (iv) OOCL Qingdao which is now between January 1, 2019 and March 15, 2019 see footnote 5 below (v) OOCL Ningbo which is between September 17, 2018 and December 17, 2018, all at charterer’s option. |
| (3) | The charters for Kumasi and Marie Delmas were amended in July 2016 to, inter alia, provide us with three consecutive options to extend the charters at $9,800 per day. The first of these options was exercised in July 2017, extending the charters to end 2018. The two remaining options allow us to extend the charters to December 31, 2020 plus or minus 90 days at charterer’s option. The earliest possible re-delivery date, not taking into account our remaining options, is shown in the table. |
| (4) | In January 2018, the charter for GSL Tianjin was extended with effect from January 26, 2018 at a fixed rate of $11,900 per day for a period of eight to 12 months, at charterer’s option. |
| (5) | In February 2018, the charter for OOCL Qingdao was extended with effect from March 11, 2018 at a fixed rate of $14,000 per day. Redelivery is now between January 1, 2019 and March 15, 2019, at the charterer’s option. |
Page 5
Global Ship Lease, Inc.
Notes to the Interim Unaudited Consolidated Financial Statements (continued)
(Expressed in thousands of U.S. dollars)
| 2. | Nature of Operations and Basis of Preparation (continued) |
(b) Basis of Preparation
The majority of the Company’s revenues are derived from charters of vessels to CMA CGM. The Company is consequently highly dependent on the performance by CMA CGM of its obligations under these charters. The container shipping industry is volatile and has been experiencing a sustained cyclical downturn. Many container shipping companies have reported financial losses.
If CMA CGM ceases doing business or fails to perform its obligations under the charters, the Company’s business, financial position and results of operations would be materially adversely affected as it is probable that, even if the Company was able to find replacement charters, such replacement charters would be at significantly lower daily rates and shorter durations. If such events occur, there would be significant uncertainty about the Company’s ability to continue as a going concern.
These consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, nor to the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern.
| 3. | Accounting Policies and Disclosure |
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 statement of financial position and results of operations for the interim periods presented. The financial information does not include all disclosures required under United States Generally Accepted Accounting Principles (“US GAAP”) for annual financial statements. These interim unaudited consolidated financial statements should be read in conjunction with the Company’s financial statements as of December 31, 2017 filed with the Securities and Exchange Commission on March 29, 2018 in the Company’s Annual Report on Form 20-F.
Impairment Testing
Fixed assets such as vessels are reviewed individually for impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. An impairment charge is recognized when the sum of the expected undiscounted future cash flows from the asset over its estimated remaining useful life is less than its carrying amount and is recorded equal to the amount by which the asset’s carrying amount exceeds its fair value. Fair value is the net present value of estimated future cash flows, discounted by an appropriate discount rate.
The assumptions used involve a considerable degree of estimation. Actual conditions may differ significantly from the assumptions and thus actual cash flows may be significantly different to those expected with a material effect on the recoverability of each vessel’s carrying amount. The most significant assumptions made for the determination of expected cash flows are (i) charter rates on expiry of existing charters, which are based on forecast charter rates, where relevant, for the four years from the date of the test and a reversion to the historical mean for each vessel thereafter (ii) off-hire days, which are based on actual off-hire statistics for the Company’s fleet (iii) operating costs, based on current levels escalated over time based on long term trends (iv) dry docking frequency, duration and cost, (v) estimated useful life which is assessed as a total of 30 years, and (vi) estimated residual value. In the case of an indication of impairment, the results of a recoverability test would also be sensitive to the discount rate applied.
Recently issued accounting standards
ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” was issued by the Financial Accounting Standards Board (“FASB”) in May 2014 and became effective for annual periods which began after December 15, 2017. This ASU superceded nearly all existing revenue recognition guidance under U.S. GAAP. An entity shall apply the guidance in this Topic to all contracts with customers, subject to several exceptions. The Company’s contracts with customers fall within the scope of Topic 840, Leases (updated to be Topic 842), and are therefore exempt from Topic 606 (ASC 606-10-15-2 (a)).
Page 6
Global Ship Lease, Inc.
Notes to the Interim Unaudited Consolidated Financial Statements (continued)
(Expressed in thousands of U.S. dollars)
| 3. | Accounting Policies and Disclosure (continued) |
Recently issued accounting standards (continued)
On March 28, 2018, the FASB tentatively approved practical expedients to ASC 842 (Leases) which would allow lessors to have the option to aggregate non-lease components with the related lease component. The option would be available to a lessor if (i) the timing and pattern of transfer for the non-lease component and the related lease component are the same and (ii) the stand-alone lease component would be classified as an operating lease if accounted for separately. If so elected, the lessor would account for the combined component based on its predominant characteristic and such accounting would need to be applied consistently to similar classes of underlying assets. The Company will adopt ASC 842 with effect from January 1, 2019 and expects to apply the practical expedients. As the predominant characteristic is the lease component, the Company will account for the operating leases under ASC 842 and does not anticipate, beyond additional disclosures, any material impact on the financial statements. For the operating lease for its office space, under ASC 842, a right-of-use asset and a corresponding lease liability for the remaining period of the lease will be recognised on the Consolidated Balance Sheet from January 1, 2019, and amortised on a straight line basis over the remaining lease term. Additional disclosures will be required, but there will be no material change to the Consolidated Statements of Income or Consolidated Statements of Cash Flows.
Management do not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the interim unaudited consolidated financial statements of the Company.
| 4. | Vessels in Operation, less Accumulated Depreciation |
| March 31, 2018 |
December 31, 2017 |
|||||||
| Cost |
$ | 917,034 | $ | 1,003,440 | ||||
| Accumulated depreciation |
(326,189 | ) | (318,037 | ) | ||||
| Vessel impairment |
— | (87,624 | ) | |||||
|
|
|
|
|
|||||
| Net book value |
$ | 590,845 | $ | 597,779 | ||||
|
|
|
|
|
|||||
Whilst charter rates in the spot market and asset values saw improvements through 2017, taking into account the seasonal as well as cyclical nature of the container shipping industry, the recovery is not considered to have been sufficiently sustained not to undertake a fleet-wide review for impairment as at December 31, 2017; which resulted in an impairment charge on five vessels, totalling $87,624, being recognised in the three months ended December 31, 2017.
In January 2018, the Company agreed with CMA CGM to extend the charter on GSL Tianjin by eight to 12 months (at the charterer’s option) at a fixed rate of $11,900 per day, commencing January 26, 2018. In February 2018, the Company agreed with OOCL to extend the charter of OOCL Qingdao to between January 1, 2019 and March 15, 2019 (at the charterer’s option) at a fixed rate of $14,000 per day, commencing March 11, 2018. These extensions triggered the performance of an impairment test on the two vessels. No impairment was identified.
| 5. | Vessel Deposits |
The Company agreed in March 2018 to acquire a 2005-built, 2,800 TEU containership for a purchase price of $11,275. A deposit of 10% has been paid for this vessel. Following delivery, which is expected to be during the second quarter of 2018 once the existing charter terminates, the vessel will commence charter employment with CMA CGM for a period of 12 months at a fixed rate of $9,000 per day.
Page 7
Global Ship Lease, Inc.
Notes to the Interim Unaudited Consolidated Financial Statements (continued)
(Expressed in thousands of U.S. dollars)
| 6. | Long-Term Debt |
| March 31, 2018 |
December 31, 2017 |
|||||||
| 2022 Notes |
$ | 360,000 | $ | 360,000 | ||||
| Less original issue discount |
(3,600 | ) | (3,600 | ) | ||||
| Amortization of original issue discount |
334 | 133 | ||||||
|
|
|
|
|
|||||
| 2022 Notes (note 6(d)) |
356,734 | 356,533 | ||||||
| Super Senior Term Loan (note 6(e)) |
54,800 | 54,800 | ||||||
| Less: Deferred financing costs (note 6(g)) |
(11,789 | ) | (12,818 | ) | ||||
|
|
|
|
|
|||||
| Balance |
399,745 | 398,515 | ||||||
| Less: Current portion of 2022 Notes (note 6(d)) |
(20,000 | ) | — | |||||
| Less: Current portion of Super Senior Term Loan (note 6(e)) |
(20,000 | ) | (40,000 | ) | ||||
|
|
|
|
|
|||||
| Non-current portion of Long-Term Debt |
359,745 | 358,515 | ||||||
|
|
|
|
|
|||||
(a) 10.0% First Priority Secured Notes Due 2019
In March 2014 the Company issued $420,000 of 10.0% First Priority Secured Notes with a final maturity on April 1, 2019. These 2019 Notes were fully repaid and terminated on November 22, 2017 using proceeds of the issue of the 2022 Notes (see note 6(d)).
Interest on the 2019 Notes was payable semi-annually on April 1 and October 1 of each year. The 2019 Notes were secured by first priority ship mortgages on 16 of the Company’s 18 vessels and by assignments of earnings and insurances, a pledge over certain bank accounts, as well as share pledges over each subsidiary owning the 16 mortgaged vessels. In addition, the 2019 Notes were fully and unconditionally guaranteed, jointly and severally, by the Company’s 18 vessel owning subsidiaries and Global Ship Lease Services Limited.
The original issue discount was amortised on an effective interest rate basis over the life of the 2019 Notes.
Under the terms of the 2019 Notes, the Company was required within 120 days following the end of each financial year in which the Company has at least $1,000 of Excess Cash Flow, as defined, to offer to purchase up to a maximum offer amount of $20,000, such amount being the aggregate of 102% of the principal amount plus any accrued and unpaid interest thereon, up to, but not including, the purchase date. The first such offer, for 2014, in the maximum amount of $20,000, was launched on April 21, 2015. At the close of this offer, $350 nominal amount of 2019 Notes was tendered and accepted.
Following the sale of two vessels secured to the 2019 Notes in November and December 2015, the Company was required to offer the net sale proceeds, less a proportion to be used to repay part of the associated Revolving Credit Facility (see note 6(b)), to Noteholders (“Collateral Sale Offer”) within 90 days of receipt of the sale proceeds. The terms of the Collateral Sale Offer are the same as those of the annual Excess Cash Flow Offer. Consequently, on February 2, 2016, the Company launched a combined Excess Cash Flow Offer for 2015 and the Collateral Sale Offer in an aggregate amount of $28,417 (“Maximum Offer Amount”), at a purchase price of 102% of the aggregate principal amount plus any accrued and unpaid interest thereon, up to, but not including, the purchase date. At the close of this offer, the nominal amount of 2019 Notes tendered exceeded the Maximum Offer Amount and $26,662 were accepted on a pro rata basis.
The third Excess Cash Flow offer, for 2016, in the maximum amount of $20,000, was launched on March 22, 2017. At the close of this offer on April 19,2017, the 2019 Notes tendered exceeded the Maximum Offer Amount and $19,501 nominal amount of the 2019 Notes was accepted on a pro rata basis.
In May, August and November, 2016, the Company purchased $4,200, $5,000 and $18,000 of Notes respectively, in the open market. This gave rise to gains of $452, $475 and $1,938, which are included within Interest Expense in the Consolidated Statements of Income. These Notes were subsequently cancelled.
Page 8
Global Ship Lease, Inc.
Notes to the Interim Unaudited Consolidated Financial Statements (continued)
(Expressed in thousands of U.S. dollars)
| 6. | Long-Term Debt (continued) |
(b) Revolving Credit Facility
On March 19, 2014, and in connection with the 2019 Notes, the Company entered into a $40,000 senior secured revolving credit facility with Citibank N.A. (the “Revolving Credit Facility”) with a final maturity on October 1, 2018. The interest rate under the facility was USD LIBOR plus a margin of 3.25% and was payable at least quarterly. The outstanding balance of the Revolving Credit Facility was fully repaid on October 31, 2017 using proceeds of the Super Senior Term Loan (see note 6(e)).
(c) Secured Term Loan
On July 29, 2015, the Company entered into a $35,000 secured term loan with DVB Bank SE (the “Secured Term Loan”) with a maturity five years after drawdown, with early repayment, inter alia, if the 2019 Notes were not refinanced by November 30, 2018, or if the secured vessel ceased to be employed on a charter for a period in excess of 90 days. This Secured Term Loan was fully repaid on October 26, 2017 using proceeds of the new Super Senior Term Loan (see note 6(e)) and cash on hand.
The Secured Term Loan bore interest at USD LIBOR plus a margin of 2.75% and was payable at least quarterly.
The Secured Term Loan was secured by a first priority ship mortgage on OOCL Tianjin and by assignment of earnings and insurances for the same vessel.
(d) 9.875% First Priority Secured Notes due 2022
On October 31, 2017 the Company completed the sale of $360,000 of 9.875% First Priority Secured Notes (“the 2022 Notes”) which mature on November 15, 2022. Proceeds after the deduction of the original issue discount, but before expenses, amounted to $356,400.
Interest on the 2022 Notes is payable semi-annually on May 15 and November 15 of each year, commencing on May 15, 2018. As at December 31, 2017 the 2022 Notes were secured by first priority ship mortgages on all of the Company’s 18 vessels (the “Mortgaged Vessels”) and by assignments of earnings and insurances, pledges over certain bank accounts, as well as share pledges over each subsidiary owning a Mortgaged Vessel. In addition, the 2022 Notes are fully and unconditionally guaranteed, jointly and severally, by the Company’s 18 vessel owning subsidiaries and Global Ship Lease Services Limited.
The Company is required to have a minimum cash balance of $20,000 on each test date, being March 31, June 30, September 30 and December 31 in each year.
The original issue discount is being amortised on an effective interest rate basis over the life of the 2022 Notes.
The Company is required to annually repay $40,000 for the first three years and $35,000 thereafter, across both the 2022 Notes and the new Super Senior Term Loan (see note 6(e)). Around the first and second anniversary of the issue of the 2022 Notes, the Company will offer to redeem $20,000 of the 2022 Notes at a purchase price of 102%. Any such offer not accepted will be applied to repay the Super Senior Term Loan at par. Should the amount outstanding under the Super Senior Term Loan be insufficient to absorb the repayment, the excess will be mandatorily redeemed against the 2022 Notes at 102%. Around the third anniversary of the issue of the 2022 Notes, the Company will mandatorily redeem $40,000 of the 2022 Notes at a purchase price of 102%, less any amount remaining under the Super Senior Term Loan. Around the fourth anniversary of the issue of the 2022 Notes, the Company will mandatorily redeem $35,000 of the 2022 Notes at a purchase price of 102%.
Page 9
Global Ship Lease, Inc.
Notes to the Interim Unaudited Consolidated Financial Statements (continued)
(Expressed in thousands of U.S. dollars)
| 6. | Long-Term Debt (continued) |
| (e) | Super Senior Term Loan |
On October 26, 2017, and in connection with the 2022 Notes, the Company entered into a new $54,800 Super Senior Term Loan with Citibank N.A. (the “Super Senior Term Loan”). The term loan was drawn down in full on October 31, 2017 and matures no later than October 31, 2020. The interest rate is USD LIBOR plus a margin of 3.25% and is payable at least quarterly.
The collateral provided to the 2022 Notes also secures on a first priority basis the Super Senior Term Loan. The Company is required to have a minimum cash balance of $20,000 on each test date, being March 31, June 30, September 30 and December 31 in each year.
The Company is required to repay $10,000 semi-annually for the first two years and $7,400 semi-annually in the third year on April 30 and October 31. Amounts outstanding can also be repaid in line with the repayment mechanism set out in note 6(d) above.
(f) Repayment Schedule
Based on scheduled repayments from January 1, 2018 the long term debt, comprising the 2022 Notes and the Super Senior Term Loan, will be reduced in each of the relevant periods as follows:
| Year ending March 31, |
||||
| 2019 |
$ | 40,000 | ||
| 2020 |
40,000 | |||
| 2021 |
40,000 | |||
| 2022 |
35,000 | |||
| 2023 |
259,800 | |||
|
|
|
|||
| 414,800 | ||||
| Less: amortization of original issue discount |
(3,266 | ) | ||
| Less: amortization of deferred financing costs |
(11,789 | ) | ||
|
|
|
|||
| $ | 399,745 | |||
|
|
|
(g) Deferred financing costs
| March 31, 2018 |
December 31, 2017 |
|||||||
| Opening balance |
$ | 12,818 | $ | 7,100 | ||||
| Expenditure in the period |
— | 13,177 | ||||||
| Amortization included within interest expense |
(1,029 | ) | (7,459 | ) | ||||
|
|
|
|
|
|||||
| Closing balance |
$ | 11,789 | $ | 12,818 | ||||
|
|
|
|
|
|||||
Costs amounting to $13,177 were incurred in connection with the Company’s issue of the 2022 Notes and agreeing the Super Senior Term Loan. These are being amortized on an effective interest rate basis over the life of the financings for which they were incurred.
The remaining unamortized balance of deferred financing costs related to the 2019 Notes and the Secured Term Loan, which were fully repaid and terminated in October 2017, amounting to $4,191 was written off and recorded within interest expense within the Consolidated Statements of Income in the quarter ended December 31, 2017. As the replacement of the Revolving Credit Facility with the Super Senior Term Loan is deemed to be a debt modification, the remaining unamortized balance of deferred financing costs related to the Revolving Credit Facility are carried forward and being amortized with the costs of the Super Senior Term Loan.
Page 10
Global Ship Lease, Inc.
Notes to the Interim Unaudited Consolidated Financial Statements (continued)
(Expressed in thousands of U.S. dollars)
| 7. | Related Party Transactions |
CMA CGM is presented as a related party as it was, until the merger referred to in note 1, the parent company of Global Ship Lease, Inc. and at March 31, 2018, is a significant shareholder of the Company, owning Class A and Class B common shares representing a 44.4% voting interest in the Company.
Amounts due to and from CMA CGM companies are shown in the Consolidated Balance Sheets. The current account balances at March 31, 2018 and December 31, 2017 relate to amounts payable to or recoverable from CMA CGM group companies. The majority of the Company’s charter arrangements are with CMA CGM and one of its subsidiaries provides the Company with ship management services for some of its vessels.
Time Charter Agreements
The majority of the Company’s time charter arrangements are with CMA CGM. Under these time charters, hire is payable in advance and the daily rate is fixed for the duration of the charter. The charters are for remaining periods as at March 31, 2018 of between 0.4 and 7.8 years (see note 2(a)). Of the $450,582 maximum contracted future charter hire receivable (including all periods at the Company’s option) for the fleet set out in note 8, $438,762 relates to the 16 vessels that were chartered to CMA CGM as at March 31, 2018. Revenues generated from charters to CMA CGM are shown separately in the Consolidated Statements of Income.
Ship Management Agreements
At March 31, 2018, the Company outsourced day to day technical management of 7 of its vessels to CMA Ships Limited (“CMA Ships”), a wholly owned subsidiary of CMA CGM. The Company pays CMA Ships an annual management fee of $123 per vessel (2017: $123) and reimburses costs incurred by CMA Ships on its behalf, mainly being for the provision of crew, lubricating oils and routine maintenance. Such reimbursement is subject to a cap per day per vessel, depending on the vessel. The impact of the cap is determined annually on a vessel by vessel basis for so long as the initial charter remains in place; no claims have been made under the cap agreement. Ship management fees related to CMA Ships are shown separately in the Consolidated Statements of Income.
Except for transactions with CMA CGM companies, the Company did not enter into any other related party transactions.
| 8. | Commitments and Contingencies |
Charter Hire Receivable
The Company has entered into time charters for its vessels. The charter hire is fixed for the duration of the charter. The maximum contracted annual future charter hire receivable (not allowing for any offhire and assuming expiry at the mid-point between the earliest and latest possible end dates) for the 18 vessels as at March 31, 2018, and assuming the owner’s options included in the charters for Kumasi and Marie Delmas are exercised, is as follows:
| Year ending March 31, |
||||
| 2019 |
128,803 | |||
| 2020 |
105,176 | |||
| 2021 |
82,209 | |||
| 2022 |
49,996 | |||
| 2023 |
36,992 | |||
| Thereafter |
47,405 | |||
|
|
|
|||
| $ | 450,582 | |||
|
|
|
Page 11
Global Ship Lease, Inc.
Notes to the Interim Unaudited Consolidated Financial Statements (continued)
(Expressed in thousands of U.S. dollars except share data)
| 9. | Share Capital |
At March 31, 2018 the Company had two 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. Dividends, when declared, must be paid as follows:
| • | firstly, to all Class A common shares at the applicable rate for the quarter; |
| • | secondly, to all Class A common shares until they have received payment for all preceding quarters at the rate of $0.23 per share per quarter; |
| • | thirdly, to all Class B common shares at the applicable rate for the quarter; |
| • | then, to all Class A and B common shares as if they were a single class. |
The Class B common shares remain subordinated until the Company has paid a dividend at least equal to $0.23 per quarter per share on both the Class A and Class B common shares for the immediately preceding four-quarter period. Due to the requirements described above, Class B common shares cannot receive any dividend until all Class A common shares have received dividends representing $0.23 per share per quarter for all preceding quarters. Should the notional arrearages of dividend on the Class A common shares be made up and a dividend at the rate of $0.23 per share be paid for four consecutive quarters, the Class B common shares convert to Class A common shares on a one-for-one basis. Also, each Class B common share will convert into a Class A common share on a change of control of the Company.
A dividend of $0.10 per Class A common share was paid on August 24, 2015 and on November 24, 2015. Prior to these, the last quarter for which a dividend was paid was the fourth quarter 2008 at $0.23 per Class A common share.
Restricted stock units have been granted periodically to the Directors and management, under the Company’s 2008 Equity Incentive Plan, as part of their compensation arrangements (see note 9). On August 28, 2015, the Company adopted the 2015 Equity Incentive Plan. The 2008 Equity Incentive Plan was closed. The 2015 Plan permits a maximum issuance of 1,500,000 shares. On 29 December 2017, 34,125 shares were issued under the 2015 Plan, representing 20% of the directors’ base fee for 2017. On March 31, June 30, September 30 and December 30, 2016, 8,529, 8,534, 8,534 and 8,528 shares respectively, were issued under the 2015 Plan, representing 20% of directors’ base fee for the quarters ended March 31, June 30, September 30, and December 31, 2016. In both years, the number of shares to be issued was determined on the basis of a notional value per share of $4.00 rather than market values.
On August 20, 2014, the Company issued 1,400,000 depositary shares, each of which represents 1/100th of one share of the Company’s 8.75% Series B Cumulative Redeemable Perpetual Preferred Shares (the “Series B Preferred Shares”). Dividends are payable at 8.75% per annum in arrears on a quarterly basis. At any time after August 20, 2019 (or within 180 days after the occurrence of a fundamental change), the Series B Preferred Shares may be redeemed, at the discretion of the Company, in whole or in part, at a redemption price of $2,500.00 per share (equivalent to $25.00 per depositary share). The net proceeds from the offering were $33,497. These shares are classified as Equity in the Consolidated Balance Sheets. The dividends payable on the Series B Preferred Shares are presented as a reduction of Retained Earnings in the Consolidated Statements of Equity, when and if declared by the Board of Directors. An initial dividend was declared on September 22, 2014 for the third quarter 2014. Subsequent quarterly dividends have been declared, the last of which was on March 1, 2018 for the first quarter 2018.
Page 12
Global Ship Lease, Inc.
Notes to the Interim Unaudited Consolidated Financial Statements (continued)
(Expressed in thousands of U.S. dollars except share data)
| 10. | Share-Based Compensation |
Share based awards since January 1, 2017, are summarized as follows:
| Restricted Stock Units | ||||||||||||
| Number of Units |
Weighted Average Fair Value on Grant Date |
Actual Fair Value on Vesting Date |
||||||||||
| Unvested as at January 1, 2017 |
500,000 | $ | 2.42 | n/a | ||||||||
|
|
|
|
|
|
|
|||||||
| Unvested as at December 31, 2017 |
500,000 | $ | 2.42 | n/a | ||||||||
|
|
|
|
|
|
|
|||||||
| Granted January 8, 2018 |
200,000 | 1.16 | n/a | |||||||||
| Granted March 1, 2018 |
200,000 | 1.13 | n/a | |||||||||
|
|
|
|
|
|
|
|||||||
| Unvested as at March 31, 2018 |
900,000 | $ | 1.85 | n/a | ||||||||
|
|
|
|
|
|
|
|||||||
Using the graded vesting method of expensing the restricted stock unit grants, the calculated weighted average fair value of the stock units is recognized as compensation cost in the Consolidated Statements of Income over the vesting period. During the three months ended March 31, 2018, the Company recognized $47 (2017: $ nil) share based compensation cost. As at March 31, 2018, there was $179 unrecognized compensation cost relating to the above share based awards (December 31, 2017: $ nil).
Restricted stock units granted to four members of management on September 2, 2011 were to vest over two years; half during September and October 2012 and the remaining half during September and October 2013. In March 2012, these grants were amended and restated to provide that vesting would occur only when the individual leaves employment, for whatever reason, provided that this was after September 30, 2012 in respect of half of the grant and after September 30, 2013 for the other half of the grant. Restricted stock units granted to management on March 13, 2012 are expected to vest when the individual leaves employment, provided that this is after September 30, 2014 and is not as a result of resignation or termination for cause. Restricted stock units granted to management on March 7, 2013 are expected to vest when the individual leaves employment, provided that this is after September 30, 2015 and is not as a result of resignation or termination for cause.
On August 28, 2015, the Company adopted the 2015 Equity Incentive Plan which allows the Board of Directors to grant employees, consultants and directors of the Company and its subsidiaries, options, stock appreciation rights, stock grants, stock units and dividend equivalents on substantially the same terms as the 2008 Plan, which was closed for further awards. The 2015 Plan permits a maximum issuance of 1,500,000 shares.
Restricted stock units were granted to four members of management on March 3, 2016, under the 2015 Plan and divided into two tranches. The first tranche (100,000 restricted stock units) will vest when the individual leaves employment, provided that this was after December 31, 2016 and is not for cause. The second tranche (100,000 restricted stock units) also vests after December 31, 2016 on the same terms, but, in addition, only if and when the stock price has been at or above $5.00 for 20 consecutive trading days and provided that this has occurred before December 31, 2019.
Restricted stock units were granted to five members of management on January 8, 2018 under the 2015 Plan, as part of their 2017 remuneration, divided into two tranches. The first tranche (100,000 restricted stock units) will vest when the individual leaves employment, provided that this was after March 31, 2018 and is not for cause. The second tranche (100,000 restricted stock units) also vests after March 31, 2018 on the same terms, but, in addition, only if and when the stock price has been at or above $3.00 for 20 consecutive trading days and provided that this has occurred before December 31, 2020.
Page 13
Global Ship Lease, Inc.
Notes to the Interim Unaudited Consolidated Financial Statements (continued)
(Expressed in thousands of U.S. dollars except share data)
| 10. | Share-Based Compensation (continued) |
Restricted stock units were granted to five members of management on March 1, 2018 under the 2015 Plan, as part of their 2018 remuneration, divided into two tranches. The first tranche (100,000 restricted stock units) will vest when the individual leaves employment, provided that this is after March 31, 2019 and is not for cause. The second tranche (100,000 restricted stock units) also vests after March 31, 2019 on the same terms, but, in addition, only if and when the stock price has been at or above $3.00 for 20 consecutive trading days and provided that this has occurred before December 31, 2021.
During the years ended December 31, 2017 and 2016, 34,125 shares were issued under the 2015 Plan, representing 20% of directors’ base fee for 2017 and 2016 respectively. The number of shares to be issued was determined on the basis of a notional value per share of $4.00 rather than market values.
| 11. | Earnings per Share |
Basic earnings per common share is presented under the two-class method and is computed by dividing the earnings applicable to common stockholders by the weighted average number of common shares outstanding for the period.
Under the two class method, net income available to common stockholders, if any, is first reduced by the amount of dividends declared in respect of common shares for the current period, if any, and the remaining earnings are allocated to common shares and participating securities to the extent that each security can share the earnings assuming all earnings for the period are distributed. The Class B common shareholders’ dividend rights are subordinated to those of holders of Class A common shares (see note 8). Net income for the relevant period is allocated based on the contractual rights of each class of security and as there was insufficient net income to allow any dividend on the Class B common shares no earnings were allocated to Class B common shares.
Losses are only allocated to participating securities in a period of net loss if, based on the contractual terms, the relevant common shareholders have an obligation to participate in such losses. No such obligation exists for Class B common shareholders and, accordingly, losses would only be allocated to the Class A common shareholders.
At March 31, 2018, there were 900,000 restricted stock units granted and unvested as part of management’s equity incentive plan. As of March 31, 2018 only Class A and B common shares are participating securities.
For the three months ended March 31, 2018 and 2017, the diluted weighted average number of Class A common shares outstanding is the same as the basic weighted average number of shares outstanding, including the RSU’s without service conditions. The diluted weighted average number of shares excludes any outstanding share-based incentive awards as these would have had an antidilutive effect.
Page 14
Global Ship Lease, Inc.
Notes to the Interim Unaudited Consolidated Financial Statements (continued)
(Expressed in thousands of U.S. dollars except per share data)
| 10. | Earnings per Share (continued) |
| (In thousands, except share data) | Three months ended March 31, |
|||||||
| 2018 | 2017 | |||||||
| Class A common shares |
||||||||
| Basic weighted average number of common shares outstanding (B) |
47,609,734 | 47,575,609 | ||||||
| Weighted average number of RSU’s without service conditions (note 10,11) (B) |
400,000 | 400,000 | ||||||
| Dilutive effect of share-based incentive awards |
— | — | ||||||
|
|
|
|
|
|||||
| Common shares and common share equivalents (F) |
48,009,734 | 47,975,609 | ||||||
|
|
|
|
|
|||||
| Class B common shares |
||||||||
| Basic weighted average number of common shares outstanding (D) |
7,405,956 | 7,405,956 | ||||||
| Dilutive effect of share-based incentive awards |
— | — | ||||||
|
|
|
|
|
|||||
| Common shares (H) |
7,405,956 | 7,405,956 | ||||||
|
|
|
|
|
|||||
| Basic Earnings per Share |
||||||||
| Net income available to common shareholders |
$ | 4,192 | $ | 6,794 | ||||
| Available to: |
||||||||
| - Class A shareholders for period |
$ | 4,192 | $ | 6,794 | ||||
| - Class A shareholders for arrears |
— | — | ||||||
| - Class B shareholders for period |
— | — | ||||||
| - allocate pro-rata between Class A and B |
— | — | ||||||
| Net income available for Class A (A) |
$ | 4,192 | $ | 6,794 | ||||
| Net income available for Class B (C) |
— | — | ||||||
| Basic Earnings per share: |
||||||||
| Class A (A/B) |
$ | 0.09 | $ | 0.14 | ||||
| Class B (C/D) |
— | — | ||||||
| Diluted Earnings per Share |
||||||||
| Net income available to common shareholders |
$ | 4,192 | $ | 6,794 | ||||
| Available to: |
||||||||
| - Class A shareholders for period |
$ | 4,192 | $ | 6,794 | ||||
| - Class A shareholders for arrears |
— | — | ||||||
| - Class B shareholders for period |
— | — | ||||||
| - allocate pro rata between Class A and B |
— | — | ||||||
| Net income available for Class A (E) |
$ | 4,192 | $ | 6,794 | ||||
| Net income available for Class B (G) |
— | — | ||||||
| Diluted Earnings per share: |
||||||||
| Class A (E/F) |
$ | 0.09 | $ | 0.14 | ||||
| Class B (G/H) |
— | — | ||||||
| 11. | Subsequent Events |
There are no subsequent events other than those disclosed elsewhere in the consolidated financial statements.
Page 15