Business Context and Reporting Period
Company: Costamare Inc.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Three months ended March 31, 2013 (Unaudited)
Filing Date: April 26, 2013
Costamare Inc. is a container shipping company owning and operating a fleet of container vessels chartered to major liner operators. As of March 31, 2013, the Company owned and operated 48 container vessels with a total capacity of approximately 250,377 TEU. The Company is incorporated in the Republic of the Marshall Islands, with its principal executive office in Athens, Greece. The Konstantakopoulos family owns approximately 64.8% of the outstanding common shares.
Key Financial Metrics
| Metric (in thousands USD) | Q1 2013 | Q1 2012 |
|---|---|---|
| Voyage Revenue | $91,536 | $100,031 |
| Operating Income | $38,484 | $41,583 |
| Net Income | $24,735 | $24,534 |
| Earnings Per Share (Basic & Diluted) | $0.33 | $0.40 |
| Operating Cash Flow | $34,882 | $35,431 |
| Total Debt (Current + Non-Current) | $1,613,555 | $1,561,889 |
| Cash and Cash Equivalents | $182,880 | $273,708 (End of Q1 2012) |
| Stockholders' Equity | $536,273 | $446,633 (End of Q1 2012) |
Material Changes vs. Prior Period
- Revenue Decline: Voyage revenue decreased by approximately 8.5% to $91.5 million, primarily due to a reduction in the number of revenue days and lower average daily rates compared to the prior year.
- Net Income Stability: Despite lower revenue, Net Income increased slightly to $24.7 million (from $24.5 million) due to a significant gain on the sale of a vessel and reduced interest costs.
- EPS Dilution: Earnings per share decreased from $0.40 to $0.33, driven by an increase in the weighted average number of shares outstanding (74.8 million in 2013 vs. 61.1 million in 2012) following follow-on offerings in 2012.
- Debt Increase: Total long-term debt increased by approximately $51.7 million to $1.61 billion, reflecting new borrowings to finance vessel acquisitions and newbuild installments.
- Cash Position: Cash and cash equivalents decreased by $84.4 million during the quarter, largely due to significant investing activities related to vessel acquisitions.
Outlook, Management Commentary, and Risks
- Fleet Expansion: The Company continues to execute its fleet expansion strategy. During Q1 2013, it delivered the newbuild vessel MSC Athens and acquired the secondhand vessel Venetiko. Nine newbuild vessels remain under construction with deliveries scheduled through 2014.
- Charter Commitments: As of March 31, 2013, all vessels in operation (except one) were under long-term time charters. Future minimum contractual charter revenues are committed through 2018 and beyond, totaling approximately $2.64 billion.
- Dividends: The Company declared a quarterly dividend of $0.27 per share for Q1 2013, payable in May 2013. This maintains the dividend rate paid in the prior year.
- Financial Covenants: The Company is subject to financial covenants regarding debt-to-asset ratios, minimum liquidity, and EBITDA coverage. Management indicates compliance with these covenants.
- Risks: Key risks include exposure to interest rate fluctuations (mitigated by interest rate swaps), vessel market volatility, and the concentration of revenue from major charterers (top four charterers accounted for 85% of revenue in Q1 2013).
Investor Verification Checklist
- Debt Servicing Capacity: Verify the Company's ability to meet upcoming principal repayments, which total $125.9 million for the remainder of 2013, against current cash reserves and operating cash flow.
- Newbuild Delivery Schedule: Confirm the delivery dates and charter party terms for the remaining nine newbuild vessels to ensure revenue projections align with capital expenditure schedules.
- Derivative Exposure: Review the fair value of interest rate swaps (liability of $165.3 million) and assess the impact of potential interest rate movements on future earnings.
- Charterer Concentration: Monitor the financial health of the top four charterers, which collectively represent 85% of revenue, to assess counterparty risk.
- Scrap Sale Proceeds: Verify the final proceeds and gain recognition from the sale of vessel MSC Austria, which was delivered for scrap in April 2013 (subsequent to the reporting period).