Costamare Inc. — FY2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021; the filing is an annual report, not a standalone Q4 report. Filed March 28, 2022. Financial statements are prepared under U.S. GAAP and audited with an unqualified opinion.
Business context
Costamare owns and operates containerships chartered mainly to liner companies and entered the dry bulk market in June 2021. At year-end, it had 72 containerships and 43 dry bulk vessels in its wholly owned fleet. The dry bulk business was acquired and developed rapidly during 2021; dry bulk results are included from June 14, 2021.
Financial and operating highlights
| Metric | FY2021 | FY2020 |
|---|---|---|
| Voyage revenue | $793.6 million | $460.3 million |
| Operating income | $441.4 million | $60.3 million |
| Net income | $435.1 million | $8.9 million |
| Net income (loss) available to common shareholders | $404.1 million | $(21.6) million |
| Basic and diluted EPS | $3.28 | $(0.18) |
| Cash provided by operating activities | $466.5 million | $274.3 million |
| Cash used in investing activities | $(787.5) million | $(36.4) million |
| Cash provided by (used in) financing activities | $482.6 million | $(241.9) million |
- Revenue increased 72.4%, reflecting a larger fleet, dry bulk vessel acquisitions and stronger charter rates on some containerships. Average fleet size rose to 83.6 vessels from 60.0; ownership days increased 39%.
- Reported operating margin was approximately 55.6% and net margin approximately 54.8%, calculated from reported figures. These unusually high margins include material gains described below and should not be read as recurring operating margins.
- Operating expenses rose with fleet growth: vessel operating expenses were $180.0 million versus $117.1 million, and related-party management fees were $29.6 million versus $21.6 million. Daily vessel operating expense increased to $5,896 from $5,329, partly due to dry bulk pre-delivery costs and COVID-related crew costs.
- Liquidity at December 31 was $353.5 million, comprising $276.0 million of cash and cash equivalents and $77.5 million of restricted cash. Working capital was positive $56.1 million, compared with negative $14.9 million a year earlier. The company also reported $336.0 million of undrawn credit availability.
- Indebtedness, including finance leases, other financing arrangements and the unsecured bond, was approximately $2.6 billion. Balance-sheet long-term debt was $2.467 billion before deferred financing costs; interest and finance costs were $86.0 million, up from $68.7 million.
- Net cash increased by $161.6 million to $353.5 million. Investing outflows primarily reflected vessel acquisitions and related payments; financing inflows included substantial new borrowing. The company paid $71.3 million in cash dividends during 2021 and also issued shares under its dividend reinvestment plan.
Material changes versus FY2020
- Net income rose sharply from $8.9 million, but included a $60.2 million gain on ZIM equity sales, $1.8 million of ZIM dividends and a $45.9 million net gain on vessel sales. By comparison, FY2020 included a $79.1 million net vessel-sale loss, a $7.7 million loss on a vessel held for sale and $31.6 million of vessel impairment losses. No vessel impairment loss was recorded in 2021.
- The company acquired 43 dry bulk vessels during 2021 and reported $115.3 million of dry bulk revenue and $56.8 million of segment net income for the partial-year period. Container-vessel revenue was $678.3 million and segment net income was $303.5 million.
- Operating cash flow rose $192.2 million, while investing cash use increased substantially. Total assets increased to $4.407 billion from $3.011 billion; total stockholders’ equity rose to $1.726 billion from $1.349 billion.
- Containership charter markets strengthened markedly: the filing cites a roughly 299% year-over-year increase in the Clarksons Containership Timecharter Index to 361.79 points at December 2021. Dry bulk earnings also rebounded, though the company cautions that market conditions may reverse.
Outlook, risks and unusual items
- No formal earnings or revenue guidance is provided. Management said it expected operating cash flow to cover fleet operations and working capital, while noting that future financing availability on acceptable terms is not assured.
- At December 31, fixed-term containership charters represented approximately $3.243 billion of minimum contracted revenue under the filing’s assumptions. This excludes index-linked dry bulk charters, vessels without employment, and vessels under construction. The filing separately reported approximately $3.4 billion of containership contracted revenue as of March 18, 2022.
- Capital commitments were approximately $0.8 billion at year-end, mainly for containership newbuild installments and dry bulk vessel acquisitions. As of March 18, 2022, the company had eight newbuild containership contracts, but subsequently terminated two contracts following shipyard default; the remaining six were scheduled for delivery in 2023–2024.
- Key risks include volatile charter rates and vessel values, potential containership oversupply, short-term dry bulk charter exposure, customer concentration and counterparty risk, COVID-related operating disruption, rising crew and regulatory costs, environmental and climate requirements, and geopolitical disruption. The filing identifies the Russia-Ukraine conflict as a potential source of supply-chain, economic and counterparty risk.
- Debt is mostly secured by vessels and subject to financial and operating covenants; failure to comply could restrict dividends or permit lenders to accelerate debt and enforce vessel security. A 100-basis-point rate increase was estimated to reduce 2021 net income and cash flow by about $8 million. The company was not in default on its credit facilities.
- LIBOR transition remained in progress, with management expecting floating-rate arrangements to move to SOFR or Term SOFR by the June 2023 deadline. The company also disclosed foreign-currency exposure, hedging instruments and counterparty risk.
- Related-party matters warrant attention: the dry bulk acquisition from an entity controlled by the CEO was reported at cost for $54.5 million; the CEO’s family controls the principal managers and service provider, which receive management and other fees. The filing states there were no pending or threatened legal proceedings expected to have a material effect.
- Post-year-end, the board declared a $0.50-per-share special common dividend in addition to the regular first-quarter 2022 dividend. Common dividends remain discretionary and subject to cash needs, debt restrictions and applicable law.
Important facts for investors to verify
- Reconcile the $435.1 million net income and $3.28 EPS to recurring cash generation, separating the ZIM investment gain and vessel-sale gains from ongoing charter operations.
- Review the $2.6 billion total debt burden, maturity and balloon-payment schedule, covenant headroom, restricted cash and refinancing needs alongside the $0.8 billion capital commitments.
- Confirm the status, remaining cost and delivery schedule of the six continuing containership newbuild contracts after the two shipbuilding contract terminations.
- Assess charterer concentration, charter expirations and rechartering exposure, especially the dry bulk fleet’s short-term and index-linked employment.
- Examine related-party fees, share-based service payments, governance safeguards and the terms of the CEO-controlled Longshaw acquisition.
- Verify subsequent vessel sales and acquisitions, the declared special dividend, and whether repurchases under the $150 million common and $150 million preferred share authorizations have begun.