Costamare Inc. 20-F Filing Summary
Business Context and Reporting Period
Company: Costamare Inc.
Filing Type: Annual Report on Form 20-F
Reporting Period: Fiscal year ended December 31, 2010
Business Overview: Costamare is an international owner of containerships, operating a fleet primarily under multi-year, fixed-rate time charters to leading liner companies. As of December 31, 2010, the company owned and operated 43 vessels. The company completed its Initial Public Offering (IPO) on November 4, 2010, listing on the New York Stock Exchange under the symbol "CMRE."
Key Financial Metrics (Year Ended Dec 31, 2010)
| Metric | 2010 Value (USD) | 2009 Value (USD) |
|---|---|---|
| Voyage Revenue | $353.2 million | $399.9 million |
| Net Income | $81.2 million | $116.9 million |
| Earnings Per Share (Basic & Diluted) | $1.65 | $2.49 |
| Operating Cash Flow | $127.9 million | $161.9 million |
| Total Assets | $1,828.8 million | $1,710.3 million |
| Total Long-Term Debt | $1,341.7 million | $1,435.6 million |
| Cash and Cash Equivalents | $159.8 million | $12.3 million |
| Stockholders' Equity | $362.1 million | $155.2 million |
Note: The significant increase in cash and equity in 2010 is primarily attributable to net proceeds of approximately $145.5 million from the November 2010 IPO.
Material Changes vs. Prior Period
- Revenue Decline: Voyage revenue decreased 11.7% to $353.2 million, driven by a reduction in the average number of vessels in the fleet (42.4 in 2010 vs. 47.3 in 2009) and fewer operating days.
- Profitability Decrease: Net income fell 30.5% to $81.2 million. This was impacted by a $9.5 million one-time charter agreement early termination fee paid to MSC for the early redelivery of the vessel MSC Navarino (renamed Hyundai Navarino).
- Derivative Losses: The company recorded a $4.5 million loss on derivative instruments in 2010, compared to a $5.6 million gain in 2009, due to changes in the fair value of interest rate swaps.
- Debt Reduction: Total long-term debt decreased by approximately $94 million year-over-year, aided by debt repayments and the IPO proceeds.
- Dividend Policy: No dividends were declared or paid in 2010. The first post-IPO dividend of $0.25 per share was declared in February 2011 for the fourth quarter of 2010.
Guidance, Outlook, and Risks
Outlook and Strategy: Management intends to continue paying quarterly dividends of $0.25 per share, subject to board discretion and cash flow availability. The company plans to grow its fleet through the acquisition of secondhand vessels and newbuilds, utilizing undrawn credit facilities and cash from operations. As of March 1, 2011, the fleet consisted of 53 vessels with an average remaining time-charter duration of 5.6 years.
Key Risks and Contingencies:
- Customer Concentration: Three major customers (A.P. Moller-Maersk, MSC, and COSCO) represented 75% of revenue in 2010. The financial health of these charterers is critical to Costamare's cash flow.
- Market Volatility: The containership industry is cyclical. An oversupply of capacity and weak global economic conditions could depress charter rates upon the expiration of current contracts.
- Debt Covenants: The company is subject to strict financial covenants, including loan-to-value ratios and minimum net worth requirements. A decline in vessel market values could trigger defaults.
- Related Party Transactions: The company relies on managers (Costamare Shipping, CIEL, Shanghai Costamare) controlled by the CEO, Konstantinos Konstantakopoulos, for fleet operations, creating potential conflicts of interest.
- Regulatory and Environmental: Compliance with evolving environmental regulations (e.g., IMO Annex VI, ballast water management) may require significant capital expenditures.
Investor Verification Checklist
- Charter Expirations: Verify the specific dates and rates for the 16 vessels with charters expiring in 2012, representing a significant portion of the fleet's revenue exposure.
- Debt Covenants Compliance: Confirm current compliance with loan-to-value ratios and the $500 million market value adjusted net worth covenant, especially given the volatility in vessel values.
- Derivative Exposure: Review the fair value of the $1.3 billion notional amount of interest rate swaps and the impact of rising interest rates on future earnings.
- Customer Creditworthiness: Assess the financial stability of the top three charterers (Maersk, MSC, COSCO) given their 75% revenue concentration.
- Dividend Sustainability: Evaluate whether operating cash flows are sufficient to support the declared $1.00 per share annual dividend policy while funding fleet expansion and debt service.