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Seaspan's CEO Discusses Q1 2012 Results - Earnings Call Transcript

I would like now to turn the call over to Sai, to discuss our quarterly financial results. Sai, please.

Sai W. Chu

Thanks, Gerry. Please turn to slide four for a summary of our first quarter 2012 results, compared to our 2011 first quarter results. Revenue increased by over 25% due to the increased number of operating days and higher time charter rates attributed to deliver of our larger newbuild vessels. The increase in ship operating expense was also primarily due to an increase in the ownership days resulting from the two vessel deliveries in the first quarter of 2012, and a full period of expenses for the 10 vessel deliveries during 2011.

In addition, lubricant costs, spares and repairs and maintenance costs increased due to worldwide rise in the cost of lubricants, service and parts prices. Overall ship-operating expenses increased by a lower percentage than our revenue increase, this was consistent with the operating efficiencies achieved by our larger newbuild ships, which have a lower operating costs for TEU and the acquisitions of our Manager.

Prior to the acquisition of the Manager, the ship operating costs was comprised of fees paid to the Manager for technical services in exchange for a fixed fee per day per vessel, which was adjusted every three years. The fixed technical management fee was established based on cost expected to be incurred by the Manager in providing the technical services. As a result of the acquisition, Seaspan’s ship operating expense is now based on the direct operating costs of the vessels.

Going forward, the portion of general and administrative expenses of the Manager, previously included in the technical management fee, because they are not operating in nature will be reclassified as general and administrative expenses in 2012 and no longer included in ship operating expense. We expect our G&A expenses to increase by $8 million to $9 million for this year as a result of those new classification.

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