Business Context and Reporting Period
Company: Costamare Inc. (NYSE: CMRE)
Filing Type: Form 6-K (Press Release)
Reporting Period: Fourth Quarter and Full Year ended December 31, 2012
Business Overview: Costamare is a leading owner and provider of containerships for charter. As of January 23, 2013, the fleet consisted of 57 containerships (approx. 331,000 TEU), including 10 newbuilds on order.
Key Financial Metrics
| Metric (in millions, except per share) | Q4 2012 | Full Year 2012 |
|---|---|---|
| Voyage Revenue | $95.2 | $386.2 |
| Voyage Revenue (Cash Basis) | $97.6 | $392.4 |
| Adjusted EBITDA | $62.5 | $253.1 |
| Net Income (GAAP) | $22.9 | $81.1 |
| Adjusted Net Income | $23.6 | $91.3 |
| Earnings Per Share (GAAP) | $0.31 | $1.20 |
| Adjusted EPS | $0.32 | $1.35 |
| Cash and Cash Equivalents | $314.6 (as of Dec 31, 2012) |
Material Changes vs. Prior Period
- Revenue: Full-year voyage revenue increased 1.0% to $386.2 million, driven by larger vessels chartered at higher rates, despite a 1.9% decrease in fleet ownership days. Q4 voyage revenue decreased 6.7% year-over-year to $95.2 million due to fewer ownership days.
- Profitability: Full-year Net Income decreased 7.4% to $81.1 million. Q4 Net Income decreased 12.2% to $22.9 million. Adjusted Net Income for the full year decreased 19.2% to $91.3 million.
- Expenses: Vessels' operating expenses increased 1.9% for the full year due to a larger average vessel size. Interest and finance costs remained relatively flat, decreasing 0.9% for the full year.
- Derivatives: The fair value of 28 interest rate derivative instruments resulted in an aggregate liability of $180.8 million as of December 31, 2012.
Guidance, Outlook, and Management Commentary
- Dividend: Declared a quarterly dividend of $0.27 per share, payable February 13, 2013. This marks the ninth consecutive quarterly dividend since listing on the NYSE.
- Fleet Transactions:
- Purchase: Acquired the 5,928 TEU vessel Venetiko for $22.2 million, financed with cash. Chartered to Pacific International Lines (PIL) for 12-15 months at $14,500/day.
- Sale: Sold the 3,876 TEU vessel MSC Washington for demolition for approx. $8.2 million, realizing a book gain of $3.2 million.
- Management Structure: Entered a cooperation agreement with V Ships Greece Ltd. to establish a ship management cell. This aims to reduce management fees and align interests between the listed entity and the manager.
- Outlook: Management views the current pressured containership market as an opportunity for opportunistic expansion in a low-rate and low-asset-value environment. Re-chartering risk for 2013 and 2014 is minimized, with only 4% and 3% of contracted revenues, respectively, subject to renewal.
- Capital Commitments: Outstanding commitments for contracted newbuilds total $629.5 million, plus $17.8 million for the Venetiko acquisition.
Investor Verification Checklist
- Derivative Liability: Verify the impact of the $180.8 million fair value liability on interest rate derivatives and potential cash outflows if terminated.
- Cash Basis vs. GAAP: Review the reconciliation between GAAP voyage revenue and cash-basis revenue, noting the significant reduction in accrued charter revenue ($30.3M in 2011 vs. $6.3M in 2012).
- Re-chartering Risk: Confirm the specific vessels and rates associated with the 4% of 2013 revenue and 3% of 2014 revenue up for renewal.
- Capital Expenditures: Assess the liquidity position against the $629.5 million in outstanding newbuild commitments and the recent $22.2 million cash purchase.
- Related Party Transactions: Review the new cooperation agreement with V Ships Greece Ltd. and the mechanism for passing profits to reduce management fees.