Costamare Inc. Form 6-K Summary
Business Context and Reporting Period
This Form 6-K, filed on February 1, 2012, reports the unaudited financial results for Costamare Inc. (NYSE: CMRE) for the fourth quarter and full year ended December 31, 2011. Costamare is a leading owner and provider of containerships for charter, operating a fleet of 57 vessels with a capacity of approximately 327,000 TEU, including 10 newbuilds on order.
Key Financial Metrics
| Metric | Q4 2011 | Q4 2010 | Full Year 2011 | Full Year 2010 |
|---|---|---|---|---|
| Voyage Revenue | $102.0 million | $85.7 million | $382.2 million | $353.2 million |
| Voyage Revenue (Cash Basis) | $109.1 million | $86.7 million | $412.5 million | $339.6 million |
| Adjusted EBITDA | $74.7 million | $56.2 million | $274.7 million | $223.6 million |
| Net Income (GAAP) | $26.1 million ($0.43/share) | $11.8 million ($0.21/share) | $87.6 million ($1.45/share) | $81.2 million ($1.65/share) |
| Adjusted Net Income | $32.6 million ($0.54/share) | $18.0 million ($0.33/share) | $112.8 million ($1.87/share) | $73.8 million ($1.50/share) |
| Operating Cash Flow | $60.8 million | $39.0 million | $195.2 million | $128.0 million |
| Investing Cash Flow | ($27.1 million) | ($26.3 million) | ($283.8 million) | ($23.9 million) |
| Financing Cash Flow | ($6.2 million) | $116.2 million | $26.8 million | $43.4 million |
Liquidity and Debt: As of December 31, 2011, total cash liquidity was $144.1 million. Undrawn credit facilities totaled $153.2 million. The fair value of 28 outstanding interest rate derivative instruments represented a liability of $170.7 million.
Material Changes vs. Prior Period
- Revenue Growth: Voyage revenue increased 19.0% in Q4 2011 and 8.2% for the full year 2011 compared to 2010, driven by an increased average fleet size (48.3 vessels in Q4 2011 vs. 42.0 in Q4 2010) and escalating charter rates.
- Profitability: Net income surged 121.2% in Q4 2011 and 7.9% for the full year. Adjusted Net Income increased 80.8% in Q4 and 52.8% for the full year.
- Expense Increases: General and administrative expenses rose 250% in Q4 and 316.7% for the year, primarily due to public company costs (legal, audit, insurance) post-IPO. Depreciation increased 13.1% in Q4 due to new vessel deliveries.
- One-Time Items: Q4 2010 included a $9.5 million charter agreement early termination fee, which was absent in 2011. Q4 2011 included a $2.3 million gain on the sale/disposal of vessels.
Guidance, Outlook, and Management Commentary
Management highlighted the execution of growth plans, investing over $1 billion in newbuilding and secondhand ships in 2011. Debt funding has been arranged to minimize financing risk. The company maintains a progressive dividend policy, declaring a $0.27 per share dividend for Q4 2011 (payable February 8, 2012), marking the fifth consecutive quarterly dividend.
Outlook: Management stated that contracted cash flows and low leverage position the company to execute quickly on attractive opportunities in a down market or benefit from upside in a healthy market. The company remains returns-oriented and selective in investments.
Risks and Contingencies: The filing notes significant exposure to interest rate fluctuations, evidenced by the $170.7 million liability in derivative instruments. The company also faces standard shipping industry risks including market volatility and fuel costs.
Investor Verification Checklist
- Derivative Liability: Verify the impact of the $170.7 million fair value liability on interest rate swaps on future cash flows and comprehensive loss.
- Capital Commitments: Confirm the status of the $801.2 million outstanding commitment for contracted newbuilds and the $30.0 million commitment for the MSC Ulsan.
- Charter Expirations: Review the fleet list for vessels with charters expiring in 2012 (e.g., Hyundai Navarino, Zim New York, Zim Shanghai) to assess renewal risks.
- Non-GAAP Reconciliations: Scrutinize the adjustments made to reach Adjusted Net Income and Adjusted EBITDA, specifically the treatment of accrued charter revenue and gains on vessel sales.
- Liquidity Position: Monitor the ratio of undrawn credit facilities ($153.2 million) against upcoming capital expenditure installments.