Business Context and Reporting Period
Company: Capital Product Partners L.P. (Nasdaq: CPLP)
Filing Type: Form 6-K (Press Release)
Reporting Period: Second Quarter ended June 30, 2008
Business Overview: An international owner of modern double-hull tankers, operating a fleet of 17 vessels (14 MR product tankers, 2 small product tankers, 1 Suezmax crude oil tanker) under medium to long-term charters.
Key Financial Metrics
| Metric | Q2 2008 | Q2 2007 | YTD 2008 | YTD 2007 |
|---|---|---|---|---|
| Net Income | $12.6 million | $5.6 million | $19.4 million | $11.5 million |
| Earnings Per Unit (Total) | $0.50 | $0.22 | $0.87 | $0.22 |
| Gross Revenues | $32.0 million | $18.5 million | $59.3 million | $33.5 million |
| Operating Surplus (Non-GAAP) | $15.7 million | $10.2 million | N/A | N/A |
| Operating Expenses | $13.7 million | N/A | N/A | N/A |
| Net Interest Expense | $5.7 million | N/A | N/A | N/A |
| Long-Term Debt | $428 million | N/A | N/A | N/A |
| Partners' Equity | $198 million | N/A | N/A | N/A |
| Cash & Equivalents | $2.7 million | N/A | N/A | N/A |
Note: Operating expenses include $6.3 million in related-party management fees and $5.9 million in depreciation.
Material Changes vs. Prior Period
- Revenue Growth: Gross revenues increased 73% year-over-year (Q2 2008 vs. Q2 2007) to $32.0 million, driven by a larger fleet and higher spot rates in MR product and Suezmax crude markets.
- Profitability: Net income per unit rose to $0.50, representing a 127% increase over Q2 2007 ($0.22) and a 43% increase over Q1 2008 ($0.35).
- Fleet Expansion: The fleet grew to 17 vessels following the acquisition of M/T Aristofanis (April 30, 2008) and M/T Aristotelis II (June 17, 2008). M/T Aristofanis was consolidated for the full quarter due to common control accounting.
- Debt Levels: Long-term debt increased to $428 million from $281.8 million at year-end 2007, reflecting debt-funded acquisitions.
Guidance, Outlook, and Management Commentary
- Market Outlook: Management cites buoyant spot rates, a strong transatlantic market, and tight supply/demand balances for Suezmax tankers. Spot earnings for Suezmax tankers averaged near 10-year highs.
- Strategic Progress: The company secured a new $350 million, 5-year non-amortizing credit facility. Two newbuilding MR tankers were delivered in 2008, and two additional tankers were acquired from the sponsor, Capital Maritime.
- Future Acquisitions: The Partnership intends to fund the acquisition of M/T Aris II (scheduled for August 2008) with debt. It holds a right of first refusal on six additional MR product tankers from Capital Maritime.
- Distributions: The Board declared a cash distribution of $0.41 per unit for Q2 2008, an increase from $0.40 in the prior quarter and 9% higher than the minimum quarterly distribution.
- Risks: Forward-looking statements regarding vessel deliveries and funding are subject to risks and uncertainties that could cause actual results to differ materially.
Investor Verification Checklist
- Debt Capacity: Verify the remaining undrawn capacity of approximately $292 million under credit facilities following the $48 million acquisition of M/T Aristotelis II.
- Related Party Transactions: Confirm the terms of the 5-year fixed-rate management agreement with Capital Maritime and the volume of related-party fees ($6.3 million in Q2).
- Non-GAAP Reconciliation: Review Appendix A for the reconciliation of Operating Surplus ($15.7 million) to Net Income, specifically regarding replacement capital expenditures and deferred revenue adjustments.
- Common Control Accounting: Understand the impact of consolidating M/T Aristofanis for the full quarter despite the April 30 acquisition date, which inflated Q2 comparables.
- Liquidity Position: Assess the cash balance of $2.7 million against upcoming debt obligations and the scheduled August 2008 distribution payment.