Costamare Inc. Q1 2012 Financial Summary
Business Context and Reporting Period
This Form 6-K filing, dated May 8, 2012, reports the unaudited financial results for Costamare Inc. (NYSE: CMRE) for the three-month period ended March 31, 2012. Costamare is a leading owner and provider of containerships for charter, operating a fleet of 56 vessels with approximately 326,000 TEU capacity, including 10 newbuilds on order.
Key Financial Metrics
| Metric | Q1 2012 | Q1 2011 |
|---|---|---|
| Voyage Revenue | $100.0 million | $86.0 million |
| Voyage Revenue (Cash Basis) | $100.5 million | $94.0 million |
| Adjusted EBITDA | $67.1 million | $61.3 million |
| Net Income (GAAP) | $24.5 million ($0.40/share) | $17.9 million ($0.30/share) |
| Adjusted Net Income | $25.2 million ($0.41/share) | $22.4 million ($0.37/share) |
| Operating Cash Flow | $35.4 million | $39.4 million |
| Total Cash Liquidity | $320.8 million | N/A |
| Undrawn Credit Facilities | $18.5 million | N/A |
Material Changes vs. Prior Period
- Revenue Growth: Voyage revenue increased 16.3% year-over-year, driven by an increased average fleet size (46.5 vs. 45.5 vessels) and reduced off-hire days due to fewer vessels undergoing dry-docking.
- Profitability: Net income rose 36.9% to $24.5 million. Adjusted Net Income increased 12.5% to $25.2 million.
- Expense Management: Voyage expenses decreased 36.4% due to lower off-hire costs. General and administrative expenses dropped 25.0% primarily due to reduced legal and audit fees.
- Capital Structure: Interest and finance costs increased 8.0% to $20.3 million, partly due to new credit facilities for the newbuilding program.
- Derivatives: The company recorded a $3.0 million gain on derivative instruments, down from $4.7 million in the prior year. As of March 31, 2012, the fair value of outstanding interest rate derivatives represented a liability of $160.3 million.
Guidance, Outlook, and Management Commentary
Management emphasized a strategy of prudent fleet renewal and maintaining a conservative capital structure. Key developments include:
- Fleet Transactions: Agreed to sell two older vessels (Gifted, Genius I) for approximately $12.3 million and purchase two newer 1998-built vessels for $24.9 million. The new vessels will replace the sold ones under extended charters averaging $11,150 per day.
- New Charters: Chartered the 8,531 TEU Hyundai Navarino to Evergreen Marine for 18 months at $30,950 per day. Extended charters for three other vessels (Zagora, Prosper, Karmen).
- Capital Raise: Completed a follow-on public offering in March 2012 of 7.5 million shares at $14.10 per share, generating gross proceeds of approximately $105.8 million. The controlling Konstantakopoulos family purchased 10% of the offering.
- Dividends: Declared a quarterly dividend of $0.27 per share, payable May 9, 2012.
- Outlook: Management stated they remain returns-oriented, valuing optionality to execute quickly in a down market or benefit from upside in a healthy market. Re-chartering risk for 2012 is low, with only four vessels coming out of charter (excluding options), representing less than 2% of contracted revenues.
Investor Verification Checklist
- Verify the delivery and charter substitution of the two 1998-built vessels (Koroni and Kyparissia) replacing the sold 1984-built vessels.
- Confirm the utilization of the $100.6 million net proceeds from the March 2012 equity offering against the $772.5 million in outstanding newbuild commitments.
- Monitor the fair value changes of the $160.3 million interest rate derivative liability and its impact on comprehensive income.
- Track the re-chartering of the four vessels expiring in 2012 to ensure rates align with management's conservative outlook.
- Review the cash flow impact of the $44.4 million used in investing activities, specifically regarding newbuild advances and secondhand acquisitions.