Costamare Inc. Form 6-K Summary
Business Context and Reporting Period
This Form 6-K, filed on October 23, 2012, reports unaudited financial results for Costamare Inc. (NYSE: CMRE) for the third quarter and nine-month period ended September 30, 2012. Costamare is a leading owner and provider of containerships for charter, operating a fleet of 57 vessels with a total capacity of approximately 329,000 TEU, including 10 newbuilds on order.
Key Financial Metrics
| Metric | Q3 2012 | Q3 2011 | 9M 2012 | 9M 2011 |
|---|---|---|---|---|
| Voyage Revenue | $94.9 million | $99.9 million | $291.0 million | $280.2 million |
| Voyage Revenue (Cash Basis) | $97.8 million | $107.7 million | $294.9 million | $303.4 million |
| Adjusted EBITDA | $62.5 million | $72.9 million | $190.6 million | $200.0 million |
| Net Income (GAAP) | $12.5 million ($0.18/share) | $17.4 million ($0.29/share) | $58.2 million ($0.89/share) | $61.5 million ($1.02/share) |
| Adjusted Net Income | $20.9 million ($0.31/share) | $30.9 million ($0.51/share) | $67.7 million ($1.03/share) | $80.2 million ($1.33/share) |
| Cash and Cash Equivalents | Total liquidity as of Sept 30, 2012: $264.5 million |
Material Changes vs. Prior Period
- Revenue Decline: Q3 voyage revenue decreased 5.0% year-over-year, primarily due to a 2.8% reduction in fleet ownership days. Cash-basis revenue declined 9.2% due to lower charter hire from escalation clauses.
- Profitability Pressure: Net income fell 28.2% in Q3 and 5.4% for the nine-month period. This was driven by a $5.6 million loss on the sale of the vessel Horizon for demolition and increased dry-docking expenses.
- Expense Increases: Voyage expenses rose 112.5% in Q3 due to off-hire bunker consumption for four vessels undergoing dry-docking. Operating expenses increased 2.5% due to a larger average vessel size.
- Derivative Impact: The company recorded a $192.8 million liability for interest rate derivatives as of September 30, 2012, with a $9.4 million loss included in comprehensive loss for the quarter.
Guidance, Outlook, and Management Commentary
- Capital Raise: On October 19, 2012, the company completed a follow-on offering of 7.0 million shares at $14.00 per share, raising gross proceeds of $98.0 million. The Konstantakopoulos family purchased 700,000 shares. Proceeds will fund capital expenditures and debt repayment.
- Dividend: A quarterly dividend of $0.27 per share was declared, payable November 6, 2012, marking the eighth consecutive quarterly dividend.
- Fleet Strategy: Management fixed charters for vessels expiring in the remainder of 2012 to minimize rechartering risk. New charters for 2013 and 2014 account for approximately 4% and 3% of contracted revenues, respectively.
- Outlook: Management stated the company is well-positioned with a strong cash position, low leverage, and unencumbered assets to pursue opportunities in a market favoring well-capitalized players.
- Risks: The filing notes standard forward-looking statement risks, including market volatility and the inherent uncertainty of future results.
Investor Verification Checklist
- Derivative Liability: Verify the impact of the $192.8 million fair value liability on interest rate derivatives and potential future cash outflows if instruments are terminated.
- Charter Expirations: Review the fleet list for vessels with charters expiring in 2013 and 2014 to assess rechartering risk, as only a small percentage of future revenue is currently contracted.
- Capital Commitments: Confirm the $686.7 million in outstanding commitments for contracted newbuilds and the company's ability to fund these without further dilution.
- Asset Quality: Assess the impact of the $7.1 million book loss on the sale of the Horizon and the valuation of other older vessels in the fleet.
- Liquidity Usage: Monitor the deployment of the $98 million raised in the October offering against the stated plan for vessel acquisitions and debt repayment.