Costamare Inc. — FY2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023; this is an annual report, not a standalone 2023 Q4 filing. Financial statements are prepared under U.S. GAAP and were audited with unqualified opinions. Management and the auditor reported effective internal control over financial reporting.
Business context
Costamare owns and operates containerships and dry bulk vessels, runs a dry bulk charter-in/charter-out platform, and controls Neptune Maritime Leasing, a maritime sale-and-leaseback business. At December 31, 2023, the company owned or operated 68 containerships and 42 dry bulk vessels. The filing’s later fleet snapshot, as of March 19, 2024, shows 68 containerships and 37 dry bulk vessels, reflecting subsequent sales.
Financial highlights
| Metric | FY2023 | FY2022 |
|---|---|---|
| Total revenue | $1,511.4 million | $1,113.9 million |
| Operating income | $468.0 million | $662.2 million |
| Net income | $381.0 million | $554.7 million |
| Net income available to common stockholders | $354.7 million | $523.9 million |
| Diluted EPS | $2.95 | $4.26 |
| Cash from operating activities | $331.4 million | $581.6 million |
- Revenue rose 34.9%, largely due to Costamare Bulkers being fully operational, higher charter rates on certain containerships, and new leaseback income. Voyage revenue was $1,502.5 million; leaseback investment income was $8.9 million.
- Operating income and net income fell despite higher revenue. Operating margin was approximately 31.0% in 2023 versus 59.4% in 2022; net margin was approximately 25.2% versus 49.8% (calculated from reported figures).
- Results included a $112.2 million net gain on vessel sales, a $2.3 million loss on vessels held for sale, and a $0.4 million impairment charge. Interest and finance costs increased to $144.4 million from $122.2 million; interest income rose to $32.4 million from $6.0 million.
- Cash from operations declined by $250.2 million, attributed mainly to lower net cash from operations, working-capital movements, higher interest payments and dry-docking costs. Investing activities provided $79.1 million; financing activities used $396.8 million. Cash, cash equivalents and restricted cash ended the year at $825.2 million.
- At year-end, total assets were $5.287 billion, current assets $1.118 billion, and current liabilities $662.8 million; working capital was positive $454.9 million. Long-term debt and financing arrangements totaled approximately $2.365 billion before deferred financing costs; the company described total indebtedness including leases and other arrangements as approximately $2.4 billion. It reported $132.2 million of undrawn facility capacity and no credit-facility defaults.
- Weighted-average daily vessel operating expenses were $6,349, compared with $6,321 in 2022. Fleet utilization was 98.9% overall in 2023: 99.0% for containerships and 98.7% for owned dry bulk vessels.
Material changes and outlook
- The dry bulk platform drove substantial growth in both revenue and costs: 2023 voyage revenue was $507.2 million and charter-in hire expense was $340.9 million. The segment reported an $88.1 million net loss; the owned dry bulk vessel segment reported a $43.1 million net loss. The containership segment reported $507.0 million of net income.
- Neptune was consolidated from March 30, 2023. Costamare invested $119.6 million in it by year-end and reported $8.9 million of leaseback investment income. The filing describes a commitment to invest up to $200 million; the amount invested reached $123.3 million by March 19, 2024.
- Containership charter rates weakened: the cited time-charter index fell 36% during 2023. Dry bulk rates recovered, with the cited rates for major vessel classes up 57% on average and the Baltic Dry Index up 75% at year-end versus 2022. These are market indicators, not company forecasts.
- As of March 19, 2024, containership charters had approximately 3.5 years of weighted-average remaining duration and about $2.4 billion of contracted revenue, based on stated assumptions. Seven containership charters were scheduled to expire in 2024. Management said it generally seeks long-term fixed-rate containership employment, while employing owned dry bulk vessels mainly on short-term charters.
- The filing provides no specific company earnings or revenue guidance. It cites Clarkson Research’s estimate of 3.8% growth in seaborne container trade in 2024. Management said it expects operating cash flow and financing sources to meet liquidity needs, while cautioning that future financing availability and terms are uncertain.
Risks, contingencies and unusual items
- Shipping-market cyclicality, charter-rate and vessel-value swings, new vessel deliveries, and dependence on a concentrated group of liner customers could affect earnings, liquidity and vessel values. Six major liner groups generated 83% of containership revenue in 2023.
- Debt and floating-rate exposure remain material: $1,505.8 million of secured credit facilities bore SOFR-based rates at year-end. The company estimated that a 100-basis-point rate increase would have reduced 2023 net income and cash flows by about $6.4 million, after considering its debt and hedges. Covenant requirements include minimum liquidity and market-value-based tests.
- Geopolitical disruptions, including the Red Sea attacks and rerouting, Russia-Ukraine and Israel-Hamas conflicts, may affect trade routes, operating costs, insurance and counterparties. Environmental rules, including EU emissions trading and IMO efficiency requirements, could require added spending or allowances.
- Eight newbuild contracts terminated in 2022 following shipyard default remain subject to arbitration. The filing gives no clear estimate of any potential recovery.
- Related-party arrangements are extensive. The CEO controls or has interests in key ship managers, service providers, charter brokers, dry bulk agencies and Neptune’s manager. Related managers and services providers charged aggregate fees of $63.7 million in 2023; the dry bulk agencies charged $11.7 million, and Neptune’s related manager charged $2.0 million. The filing states these agreements were not negotiated at arm’s length.
- In the California pipeline-spill litigation, settlements with several claimants were reached without admission of liability and settlement payments were covered by insurance. A Pacific Airshow appeal remained pending, and the company disputed a state notice alleging reporting violations. The NTSB’s January 2024 report concluded that a different company’s vessel, not Costamare’s Beijing, initiated the pipeline release.
- Dividends are discretionary and subject to cash availability, legal limits and debt covenants. Common dividends were $0.115 per share quarterly in 2023; preferred dividends carry fixed annual rates of 7.625%–8.875%. The company repurchased $60.0 million of common shares in 2023 and paid $71.9 million in total dividends.
Investor verification priorities
- Reconcile the annual-report figures to the audited statements, especially the distinction between net income, income attributable to Costamare, and income available to common stockholders.
- Review the dry bulk platform’s charter-in commitments, voyage costs, segment losses and related-party agency fees, and assess whether the model can produce sustainable margins.
- Check debt maturities, undrawn availability, interest-rate hedges and covenant headroom, including the effect of vessel values and market rates.
- Track containership charter renewals and the extent to which contracted revenue and utilization persist as charters expire.
- Monitor Neptune’s committed investments, lessee credit quality, collateral coverage and related-party management terms.
- Follow the shipyard arbitration and remaining oil-spill claims, appeals and disputed administrative penalties; confirm insurance coverage and any resulting cash exposure.