Costamare Inc. Reports Net Income Increase of 157%

Costamare Inc. reported unaudited financial results for the third quarter and nine-months ended September 30, 2019.

Net Income increased by 157% to $36.0 million for the three-months ended September 30, 2019 (“Q3 2019”) compared to $14.0 million for the three-months ended September 30, 2018 (“Q3 2018”). Earnings per Share available to common stockholders increased by 300% to $0.24 in Q3 2019 compared to $0.06 in Q3 2018.
Adjusted Net Income available to common stockholders(1) increased by 215% to $30.9 million in Q3 2019 compared to $9.8 million in Q3 2018. Adjusted Earnings per Share(1) available to common stockholders increased by 189% to $0.26 in Q3 2019 compared to $0.09 in Q3 2018.
Voyage Revenues increased by 36% to $123.6 million in Q3 2019 compared to $90.9 million in Q3 2018.
Chartered in total 14 vessels over the quarter, benefiting from a rising market in the larger asset classes.
Declared dividend of $0.10 per share on its common stock and dividends on all four classes of its preferred stock.
(1) Adjusted Net Income available to common stockholders and Adjusted Earnings per Share are non-GAAP measures and should not be used in isolation or as substitutes for Costamare’s financial results presented in accordance with U.S. generally accepted accounting principles (“GAAP”). For the definition and reconciliation of these measures to the most directly comparable financial measure calculated and presented in accordance with GAAP, please refer to Exhibit I.

New Business Developments

A. New charter agreements

The Company has chartered in total 14 vessels over the quarter. More specifically, the Company:
I. Vessels above 5,500 TEU capacity (Post – Panamax)

– Agreed to charter the 2016-built, 11,010 TEU containership Cape Akritas with ZIM for a period of 10 to 11.5 months at charterers’ option, at a daily rate of $43,250.

– Agreed to charter the 2017-built, 11,010 TEU containership Cape Kortia with ZIM for a period of 10 to 11.5 months at charterers’ option, at a daily rate of $43,250.

– Agreed to extend the charter of the 2003-built, 5,928 TEU containership Venetiko with Hapag Lloyd for a period starting from November 1, 2019 and expiring at charterers’ option during the period from August 20, 2020 to November 1, 2020, at a daily rate of $20,000.

– Agreed to extend the charter of the 2001-built, 5,576 TEU containership Ensenada with ONE for a period starting from October 1, 2019 and expiring at charterers’ option during the period from May 1, 2020 to June 30, 2020, at a daily rate of $21,000.

II. Vessels below 5,500 TEU capacity

– Extended the charters of the 2002-built, 4,992 TEU containerships ZIM New York and ZIM Shanghai with ZIM for an additional one-year period expiring on October 1, 2020 at a daily rate of $12,430 per vessel starting from October 2, 2019.

– Agreed to extend the charter of the 2002-built, 4,132 TEU containership Ulsan with Maersk for a period of 20 to 24 months at charterers’ option, starting from October 20, 2019 at a daily rate of $12,000.

– Agreed to extend the charter of the 2004-built, 2,586 TEU containership Lakonia with Evergreen for a period of 6 to 9 months at charterers’ option, starting from September 27, 2019.

– Agreed to extend the charter of the 2000-built, 2,474 TEU containership Areopolis with Evergreen for a period of 6 to 9 months at charterers’ option, starting from September 21, 2019.

– Agreed to extend the charter of the 1997-built, 2,458 TEU containership Messini with Evergreen for a period of 6 to 9 months at charterers’ option, starting from September 3, 2019 at a daily rate of $8,650.

– Agreed to extend the charter of the 1991-built, 2,023 TEU containership MSC Namibia II with MSC for a period starting from September 2, 2019 and expiring at charterers’ option during the period from November 5, 2019 to November 20, 2019, at a daily rate of $8,000.

– Agreed to extend the charter of the 2000-built, 1,645 TEU containership Neapolis with Evergreen for a period starting from September 14, 2019 and expiring at charterers’ option during the period from January 5, 2020 to January 15, 2020, at a daily rate of $8,000.

– Agreed to extend the charter of the 1996-built, 1,504 TEU containership Prosper with Evergreen for a period of 6 to 9 months at charterers’ option, starting from August 28, 2019 at a daily rate of $7,100.

– Agreed to extend the charter of the 2008-built, 1,300 TEU containership Michigan with MSC for a period of 11 to 13 months at charterers’ option, starting from October 15, 2019 at a daily rate of $6,650.

B. Dividend announcements

On October 2, 2019, we declared a dividend for the quarter ended September 30, 2019, of $0.10 per share on our common stock, payable on November 7, 2019, to stockholders of record of common stock as of October 22, 2019.

On October 2, 2019, we declared a dividend of $0.476563 per share on our Series B Preferred Stock, a dividend of $0.531250 per share on our Series C Preferred Stock, a dividend of $0.546875 per share on our Series D Preferred Stock and a dividend of $0.554688 per share on our Series E Preferred Stock, which were all paid on October 15, 2019 to holders of record as of October 11, 2019.

C. New Financing Agreements

In July 2019, we concluded the refinancing for an amount of up to $94 million, of the indebtedness of the 2013-built 8,827 TEU capacity containerships Valor and Valiant with a leading European financial institution.
D. Vessel disposals

In October 2019, we agreed to sell the 1991-built, 2,023 TEU capacity containership Sierra II (ex. MSC Sierra II). The sale is expected to be completed in October 2019.
Mr. Gregory Zikos, Chief Financial Officer of Costamare Inc., commented:

“During the third quarter of the year the Company delivered profitable results. As was the case in the previous quarter, net income and earnings per share more than doubled, boosted by increased charter rates and the addition of new ships.

Charter rates for the larger container ships continued to improve and there is limited supply available for the post -panamax sizes.

Over the quarter, we chartered in total 14 vessels benefiting from a rising rate environment.

We have 18 post -panamax ships coming off charter over the next year which positions us favorably, should market momentum continue.”

Voyage Revenue

Voyage revenue increased by 36.0%, or $32.7 million, to $123.6 million during the three-month period ended September 30, 2019, from $90.9 million during the three-month period ended September 30, 2018. The increase is mainly attributable to revenue earned by (i) nine vessels acquired during the six-month period ended December 31, 2018, (ii) decreased off-hire days for certain of our vessels and increased charter rates for certain of our vessels during the three-month period ended September 30, 2019 compared to the three-month period ended September 30, 2018; partly offset by revenue not earned by two vessels sold in the first quarter of 2019.

Voyage revenue adjusted on a cash basis (which eliminates non-cash “Accrued charter revenue”), increased by 37.9%, or $33.9 million, to $123.3 million during the three-month period ended September 30, 2019, from $89.4 million during the three-month period ended September 30, 2018. Accrued charter revenue for the three-month periods ended September 30, 2019 and 2018 was a negative amount of $0.3 million and $1.5 million, respectively.

Voyage Expenses

Voyage expenses were $0.7 million and $1.9 million for the three-month periods ended September 30, 2019 and 2018, respectively. Voyage expenses mainly include (i) off-hire expenses of our vessels, primarily related to fuel consumption and (ii) third party commissions.

Voyage Expenses – related parties

Voyage expenses – related parties were $1.7 million and $0.8 million for the three-month periods ended September 30, 2019 and 2018, respectively. Voyage expenses – related parties represent (i) fees of 1.25% (0.75% until June 30, 2019) in the aggregate on voyage revenues charged by related managers and (ii) charter brokerage fees payable to a related charter brokerage company.

Vessels’ Operating Expenses

Vessels’ operating expenses, which also include the realized gain / (loss) under derivative contracts entered into in relation to foreign currency exposure, were $29.2 million and $27.4 million during the three-month periods ended September 30, 2019 and 2018, respectively. Daily vessels’ operating expenses were $5,282 and $5,332 for the three-month periods ended September 30, 2019 and 2018, respectively. Daily operating expenses are calculated as vessels’ operating expenses for the period over the ownership days of the period.

General and Administrative Expenses

General and administrative expenses were $1.5 million and $1.3 million during the three-month periods ended September 30, 2019 and 2018, respectively, and both include $0.63 million paid to a related manager.

Management Fees – related parties

Management fees paid to our related managers were $5.3 million and $5.0 million during the three-month periods ended September 30, 2019 and 2018, respectively.

General and administrative expenses – non-cash component

General and administrative expenses – non-cash component for the three-month period ended September 30, 2019 amounted to $0.9 million, representing the value of the shares issued to a related manager on September 30, 2019. General and administrative expenses – non-cash component for the three-month period ended September 30, 2018 amounted to $1.0 million, representing the value of the shares issued to a related manager on September 28, 2018.

Amortization of dry-docking and special survey

Amortization of deferred dry-docking and special survey costs was $2.3 million and $1.8 million during the three-month periods ended September 30, 2019 and 2018, respectively. During the three-month period ended September 30, 2018, two vessels underwent and completed their special survey and two were in process of completing their special survey. During the three-month period ended September 30, 2019, no vessel underwent any special survey.

Depreciation

Depreciation expense for the three-month period ended September 30, 2019 and 2018 was $25.3 million and $23.8 million, respectively. The increase was partly attributable to the increased average number of vessels during the three-month period ended September 30, 2019 compared to the three-month period ended September 30, 2018.

Amortization of Prepaid Lease Rentals, net

Amortization of prepaid lease rentals, net for the three-month periods ended September 30, 2019 and 2018 was nil and $2.0 million, respectively.

Loss on vessels held for sale

During the three-month period ended September 30, 2019, we recorded a loss on vessels held for sale of $0.5 million representing the expected loss from sale of two of our vessels during the next twelve-month period. During the three-month period ended September 30, 2018, we recorded a loss on vessel held for sale of $1.9 million representing the expected loss from sale of one of our vessels during the next twelve-month period.

Interest Income

Interest income amounted to $0.8 million for each of the three-month periods ended September 30, 2019 and 2018, respectively.

Interest and Finance Costs

Interest and finance costs were $24.0 million and $14.9 million during the three-month periods ended September 30, 2019 and 2018, respectively. The increase is mainly attributable to the increased average loan balance during the three-month period ended September 30, 2019 compared to the three-month period ended September 30, 2018.

Swaps’ Breakage Costs

During the three-month period ended September 30, 2019, we terminated eight interest rate derivative instruments that qualified for hedge accounting and three that did not qualify for hedge accounting and we paid the counterparties breakage costs, net in the amount of $0.016 million in the aggregate.

Equity Gain on Investments

During the three-month period ended September 30, 2019, we recorded an equity gain on investments of $3.1 million representing our share of the net gain in jointly owned companies pursuant to the Framework Deed dated May 15, 2013, as amended and restated (the “Framework Deed”), with York Capital Management Global Advisors LLC and an affiliated fund (collectively, together with the funds it manages or advises, “York”). Since November 12, 2018, we have held 100% of the equity interest in five previously jointly owned companies with York, and as of that date these five companies are consolidated in our consolidated financial statements. As of September 30, 2019, 13 companies are jointly owned with York. During the three-month period ended September 30, 2018, we recorded an equity gain on investments of $3.9 million also relating to investments under the Framework Deed.

Gain / (Loss) on Derivative Instruments

The fair value of our four interest rate derivative instruments which were outstanding as of September 30, 2019 equates to the amount that would be paid by us or to us should those instruments be terminated. As of September 30, 2019, the fair value of these four interest rate derivative instruments in aggregate amounted to a net asset of $0.1 million. The effective portion of the change in the fair value of the interest rate derivative instruments that qualified for hedge accounting is recorded in “Other Comprehensive Income” (“OCI”) while the ineffective portion is recorded in the consolidated statements of income. The change in the fair value of the interest rate derivative instruments that did not qualify for hedge accounting is recorded in the consolidated statement of income. For the three-month period ended September 30, 2019, a net loss of $0.4 million has been included in OCI and a net loss of $0.2 million has been included in Gain / (Loss) on derivative instruments in the consolidated statement of income, resulting from the fair market value change of the interest rate derivative instruments during the three-month period ended September 30, 2019.
Full Report

Source: Costamare Inc.