Costamare Inc. Q1 2013 Financial Summary
Business Context and Reporting Period
This Form 6-K filing, dated April 24, 2013, reports unaudited financial results for Costamare Inc. (NYSE: CMRE) for the three-month period ended March 31, 2013. Costamare is a leading owner and provider of containerships for charter, operating a fleet of 56 vessels with a total capacity of approximately 328,000 TEU, including eight newbuilds on order.
Key Financial Metrics
| Metric | Q1 2013 | Q1 2012 |
|---|---|---|
| Voyage Revenue | $91.5 million | $100.0 million |
| Voyage Revenue (Cash Basis) | $94.8 million | $100.5 million |
| Net Income | $24.7 million ($0.33/share) | $24.5 million ($0.40/share) |
| Adjusted Net Income | $21.9 million ($0.29/share) | $25.2 million ($0.41/share) |
| Adjusted EBITDA | $61.2 million | $67.1 million |
| Operating Cash Flow | $34.9 million | $35.4 million |
| Investing Cash Flow | ($149.6 million) | ($44.4 million) |
| Financing Cash Flow | $30.2 million | $184.7 million |
| Total Cash Liquidity (as of Mar 31) | $231.4 million | N/A |
Material Changes vs. Prior Period
- Revenue Decline: Voyage revenue decreased 8.5% year-over-year to $91.5 million, primarily due to lower charter rates on certain vessels and the absence of revenue from vessels sold for scrap in the prior year.
- Net Income Stability: Despite lower revenue, GAAP Net Income remained relatively flat at $24.7 million, supported by a $2.9 million gain on the sale of the vessel MSC Austria and a 13.3% reduction in interest and finance costs.
- Adjusted Metrics: Adjusted Net Income and Adjusted EBITDA declined significantly (13% and 8.8% respectively) when excluding non-recurring gains and non-cash accruals, reflecting the underlying pressure on charter rates.
- Capital Expenditures: Net cash used in investing activities surged to $149.6 million, driven by $129.2 million in advance payments for newbuilds and $22.2 million for a secondhand vessel acquisition.
Outlook, Management Commentary, and Risks
- Fleet Expansion: The Company delivered two 8,827 TEU newbuilds (MSC Athens and MSC Athos) which commenced 10-year charters with MSC. Eight additional newbuilds are scheduled for delivery within the next 10 months, contributing over $1.3 billion in contracted revenues.
- Dividend: A quarterly dividend of $0.27 per share was declared, marking the tenth consecutive quarterly dividend since listing on the NYSE.
- Market Strategy: Management views the current pressured containership market as an opportunity for opportunistic expansion in a low-rate environment. Re-chartering risk for 2013 and 2014 is minimized, with only 4% and 3% of contracted revenues, respectively, subject to renewal.
- Derivatives: As of March 31, 2013, the fair value of 30 outstanding interest rate derivative instruments represented a liability of $165.3 million.
- Risks: Forward-looking statements are subject to inherent uncertainties, including market rate fluctuations and the ability to secure financing for newbuilds.
Investor Verification Checklist
- Verify the sustainability of the $0.27 per share dividend given the decline in Adjusted Net Income.
- Confirm the delivery schedule and charter status of the remaining eight newbuild vessels on order.
- Review the impact of the $165.3 million derivative liability on future cash flows and interest rate exposure.
- Assess the re-chartering risk for vessels expiring in 2013, specifically the Navarino and Venetiko.
- Monitor the utilization of the $486.4 million in outstanding capital commitments for newbuilds.