Costamare Inc. Form 6-K Summary
Business Context and Reporting Period
This Form 6-K, filed on July 26, 2012, incorporates by reference the unaudited interim condensed consolidated financial statements for the six-month period ended June 30, 2012. Costamare Inc. is a container ship owner and operator. As of June 30, 2012, the Company owned and operated a fleet of 46 container vessels with a total carrying capacity of approximately 237,030 TEU. The Company charters its vessels to leading liner operators under long, medium, and short-term time charters. During the period, the Company completed a follow-on public offering of 7,500,000 shares.
Key Financial Metrics
| Metric (in thousands USD) | Six Months Ended June 30, 2012 | Six Months Ended June 30, 2011 |
|---|---|---|
| Revenue | $196,076 | $180,279 |
| Operating Income | $83,982 | $79,508 |
| Net Income | $45,681 | $44,119 |
| Earnings Per Share (Basic & Diluted) | $0.71 | $0.73 |
| Operating Cash Flow | $84,022 | $83,071 |
| Cash and Cash Equivalents (End of Period) | $241,690 | $69,628 |
| Total Debt (Current + Non-Current) | $1,552,488 | $1,443,420 |
| Stockholders' Equity | $429,052 | $329,986 |
Liquidity: Cash and cash equivalents increased significantly to $241.7 million, driven by a follow-on equity offering and net cash provided by operating activities. The Company maintains a credit facility and various term loans secured by vessel mortgages.
Material Changes vs. Prior Period
- Revenue Growth: Voyage revenue increased by 8.7% to $196.1 million, primarily due to the addition of new vessels to the fleet.
- Equity Capitalization: Stockholders' equity increased by approximately $99 million, largely due to net proceeds of $100.6 million from a follow-on public offering in March 2012.
- Debt Levels: Total debt increased by $109 million to $1.55 billion. This reflects new borrowings to finance vessel acquisitions and pre-delivery installments for newbuilds, partially offset by debt repayments.
- Derivative Liabilities: The fair value of derivative instruments (interest rate swaps) increased to a liability of $183.4 million (from $170.7 million), reflecting changes in interest rate environments.
- EPS Dilution: Despite higher net income, EPS decreased from $0.73 to $0.71 due to the increase in the weighted average number of shares outstanding following the equity offering.
Outlook, Risks, and Contingencies
- Commitments: The Company has significant commitments for ten newbuild vessels with a total aggregate price of $953.7 million. As of June 30, 2012, $210 million had been paid, with $743.8 million remaining payable through 2014.
- Charter Exposure: All vessels in operation, including those under construction, are under long-term time charters. Future minimum contractual charter revenues are committed through 2017 and beyond, totaling approximately $2.86 billion.
- Related Party Transactions: The Company relies on related parties (Costamare Shipping, CIEL, Shanghai Costamare) for vessel management, technical support, and crewing. Management fees are fixed per vessel per day.
- Financial Covenants: Debt agreements include covenants regarding the ratio of Total Liabilities to Market Value Adjusted Total Assets (max 0.75:1), minimum liquidity, and EBITDA to net interest expense coverage (min 2.50:1).
- Subsequent Events: In July 2012, the Company declared a dividend of $0.27 per share and agreed to purchase a secondhand vessel (Stadt Luebeck) for $11.3 million.
Investor Verification Checklist
- Debt Covenants: Verify compliance with the 0.75:1 debt-to-asset ratio and 2.50:1 interest coverage ratio given the increase in total debt.
- Newbuild Delivery Schedule: Confirm the delivery dates and charter rates for the ten newbuild vessels to ensure projected revenue streams materialize.
- Derivative Valuation: Assess the impact of the $183.4 million derivative liability on future cash flows and equity, particularly if interest rates rise further.
- Related Party Fees: Review the fixed management fee structure to understand cost rigidity relative to revenue fluctuations.
- Liquidity Position: Monitor the utilization of the $1.0 billion credit facility and the timing of pre-delivery installments for newbuilds against available cash.