Costamare Inc. Form 6-K Summary
Business Context and Reporting Period
This Form 6-K, filed on July 27, 2011, reports the unaudited financial results for Costamare Inc. (NYSE: CMRE) for the second quarter and six months ended June 30, 2011. Costamare is a leading owner and provider of containerships for charter, operating a fleet of 59 vessels with a total capacity of approximately 325,000 TEU, including 10 newbuilds on order.
Key Financial Metrics
| Metric | Q2 2011 (3 Months) | Q2 2010 (3 Months) | YTD 2011 (6 Months) | YTD 2010 (6 Months) |
|---|---|---|---|---|
| Voyage Revenue | $94.3 million | $89.8 million | $180.3 million | $178.8 million |
| Voyage Revenue (Cash Basis) | $101.8 million | $80.5 million | $195.7 million | $160.4 million |
| Adjusted EBITDA | $65.8 million | $52.1 million | $127.1 million | $102.7 million |
| Net Income (GAAP) | $26.2 million ($0.43/share) | $21.0 million ($0.45/share) | $44.1 million ($0.73/share) | $45.6 million ($0.97/share) |
| Adjusted Net Income | $26.9 million ($0.45/share) | $16.1 million ($0.34/share) | $49.3 million ($0.82/share) | $30.6 million ($0.65/share) |
| Operating Cash Flow | $43.7 million | $27.3 million | $83.1 million | $56.0 million |
| Investing Cash Flow | ($36.6 million) | ($14.3 million) | ($195.5 million) | ($9.2 million) |
| Financing Cash Flow | $57.1 million | ($28.7 million) | $22.3 million | ($56.7 million) |
Liquidity and Debt: As of June 30, 2011, total cash liquidity was $114.4 million. Undrawn credit lines totaled $120.0 million. The company holds 16 interest rate swaps with an aggregate fair value liability of $115.9 million as of June 30, 2011.
Material Changes vs. Prior Period
- Revenue Growth: Voyage revenue increased 5.0% in Q2 2011 compared to Q2 2010, driven by an increased average fleet size (48.7 vessels vs. 42.8). Cash-basis revenue grew 26.5% due to escalating charter rates and increased ownership days.
- Profitability: Adjusted Net Income rose significantly to $26.9 million in Q2 2011 from $16.1 million in Q2 2010. GAAP Net Income increased to $26.2 million from $21.0 million, despite higher depreciation and interest costs.
- Expenses: General and administrative expenses surged 1,200% in Q2 2011 due to public company costs (legal, audit, insurance) post-IPO. Vessel operating expenses increased 8.5% primarily due to higher ownership days.
- Derivatives: The loss on derivative instruments improved significantly, decreasing from $9.2 million in Q2 2010 to $4.8 million in Q2 2011.
Guidance, Outlook, and Management Commentary
Management reported results in line with expectations and highlighted a business model focused on optionality to acquire assets in depressed markets or benefit from re-chartering in healthy markets.
- Dividend Increase: The Board declared a Q2 dividend of $0.25 per share. Management recommended an 8% increase for the Q3 dividend, raising it to $0.27 per share.
- New Business: The company agreed to purchase the vessel MSC Linzie (renamed MSC Romanos) for $55.0 million, chartered to MSC for 63 months at $28,000/day. Additionally, five existing vessels were re-chartered for an average of 5 years at attractive rates, generating approximately $180 million in contracted revenues.
- Financing: The company secured a firm offer for financing three of five newbuilding contracts and is in advanced discussions for the remaining two.
- Risks: The filing includes standard forward-looking statement disclaimers regarding market uncertainty, interest rate fluctuations, and the impact of derivative instruments.
Investor Verification Checklist
- Verify the sustainability of the 26.5% growth in cash-basis voyage revenue against future market charter rates.
- Confirm the execution of the $55.0 million acquisition of MSC Romanos and the associated financing terms.
- Monitor the impact of the $115.9 million fair value liability on interest rate swaps on future earnings and equity.
- Assess the company's ability to service debt given the $195.5 million net cash used in investing activities for the six-month period.
- Review the specific escalation clauses in the fleet list to validate future revenue projections.