Costamare delivers strong Q2 results

costamare

Costamare reported unaudited financial results for the second quarter and six-months ended June 30, 2020.

  • Liquidity of $220.7 million as of end Q2 2020 (including our share of cash amounting to $19.6 million held in subsidiaries co-owned with York Capital Management Global Advisors LLC and an affiliated fund (collectively, together with the funds it manages or advises, “York”)).
  • Voyage Revenues of $111.9 million in Q2 2020.
  • Delivery on July 24, 2020 of the 12,690 TEU containership YM Triumph (ex Hull Nr YZJ2015-2057) the first of a series of five sister vessels ordered in May 2018. On July 25, 2020, the vessel commenced its ten-year charter with Yang Ming.
  • Adjusted Net Income available to common stockholders(1) of $31.7 million or $0.26 per share in Q2 2020.
  • Net Loss available to common stockholders of $83.9 million (mainly due to non-cash charges related to vessels held for sale and vessels’ impairment of $107.5 million) or $0.70 loss per share in Q2 2020.
  • Adjusted Net Income available to common stockholders(1) of $64.3 million or $0.54 per share for the six-month period ended June 30, 2020.
  • Net Loss available to common stockholders of $58.3 million (mainly due to non-cash charges related to vessels held for sale and vessels’ impairment of $110.8 million) or $0.49 loss per share for the six-month period ended June 30, 2020.
  • Conclusion of refinancing program with no meaningful debt maturities until 2024.
  • Arranged financing agreements for an aggregate amount of $140.0 million. More specifically:- Signed a loan facility agreement with a European financial institution for an amount of up to $70.0 million, secured by 12 vessels, in order to partially refinance an existing loan facility originally maturing in 2021.

    – Signed a loan facility agreement with a European financial institution for an amount of up to $70.0 million, secured by 6 vessels, in order to partially refinance an existing loan facility originally maturing in 2021.

  • Chartered in total 24 vessels over the quarter.
  • Sold the 1997-built, 7,403 TEU sister container vessels Kawasaki and Kokura.
  • 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 respective per share figures 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 24 vessels over the quarter. More specifically, the Company agreed to:  

I.  Vessels above 5,500 TEU capacity (Post – Panamax)

–  Extend the charters of the 2013-built, 8,827 TEU sister containerships Valor, Value, Valiant, Valence and Vantage for 2 years (until Q2-Q3 2025) with Hapag Lloyd. The daily rate of each charter is $32,400.

–  Extend the charter of the 2006-built, 9,469 TEU containership Cosco Hellas with COSCO for a period of 2 to 11 months at charterers’ option, starting from June 18, 2020, at an undisclosed daily rate.

–  Extend the charter of the 2006-built, 9,469 TEU containership Yantian (ex. Cosco Yantian) with COSCO for a period of 2 to 11 months at charterers’ option, starting from June 17, 2020, at an undisclosed daily rate.

–  Charter the 2006-built, 9,469 TEU containership Beijing (ex. Cosco Beijing) with COSCO for a period of approximately 3 to 11.5 months at charterers’ option, starting from July 5, 2020, at an undisclosed daily rate.

– Charter the 2000-built, 6,648 TEU containership Maersk Kobe with RCL Feeder for a period of 11 to 14 months at charterers’ option, starting from September 6, 2020, at a daily rate of $14,500.

–  Charter the 2000-built, 6,648 TEU containership York with Maersk for a period of 2 to 5 months at charterers’ option, starting from July 3, 2020, at a daily rate of $11,500.

– Charter the 1996-built, 7,403 TEU containership Kure with COSCO for a period of approximately 2 to 8 months at charterers’ option, starting from July 26, 2020, at a daily rate of $9,500.

–  Charter the 2001-built, 5,576 TEU containership Ensenada with Evergreen for a period of 2 to 4 months at charterers’ option, starting from July 13, 2020, at a daily rate of $8,700.

II.  Vessels below 5,500 TEU capacity

–  Exercise its option with ZIM to extend the charters of the 2002-built, 4,992 TEU sister containerships, ZIM Shanghai and ZIM New York for the period starting from October 2, 2020 to October 1, 2021, at a market rate plus $1,100 per day per vessel.

–  Extend the charter of the 2009-built, 4,258 TEU containership JPO Virgo with CMA CGM for a period of 2 to 10 months at charterers’ option, starting from May 13, 2020, at a daily rate of $8,950. Subsequently, agreed to charter the vessel to Evergreen for a period of 6 to 9 months at charterers’ option, starting from August 8, 2020, at a daily rate of $8,600.

–  Charter the 2009-built, 4,258 TEU containership Vela with OOCL for a period of approximately 3 to 9 months at charterers’ option, starting from May 19, 2020, at a daily rate of $7,950.

–  Charter the 2010-built, 4,258 TEU containership Volans with ZIM for a period of 2 to 12 months at charterers’ option, starting from June 29, 2020, at a daily rate of $7,000.

–  Charter the 2010-built, 4,258 TEU containership Vulpecula with OOCL for a period of approximately 5 to 9 months at charterers’ option, starting from July 1, 2020, at a daily rate of $7,000.

–  Extend the charter of the 2005-built, 2,556 TEU containership Etoile for a period of 5 to 8.5 months at charterers’ option, starting from August 15, 2020, at an undisclosed daily rate.

–  Charter the 2000-built, 2,474 TEU containership Areopolis with COSCO for a period of 3 to 8.5 months at charterers’ option, starting from June 16, 2020, at a daily rate of $7,500.

–  Extend the charter of the 1997-built, 2,458 TEU containership Messini with Evergreen for a period of 3 to 5 months at charterers’ option, starting from May 18, 2020, at a daily rate of $8,500.

–  Charter the 2004-built, 2,586 TEU containership Lakonia with COSCO for a period of 3 to 8.5 months at charterers’ option, starting from June 8, 2020, at a daily rate of $7,500.

–  Charter the 1996-built, 1,504 TEU containership Prosper with TS Lines for a period of approximately 1 to 3 months at charterers’ option, starting from July 10, 2020, at a daily rate of $5,500.

–  Extend the charter of the 1995-built, 1,162 TEU containership Zagora with MSC for a period of up to 2 months at charterers’ option, starting from July 1, 2020, at an undisclosed daily rate.

B.  New Financing Agreements

•  In May 2020, we entered into a loan facility agreement with a European financial institution for an amount of up to $70.0 million, in order to partially refinance a facility originally maturing in 2021 (balloon payment of $48.0 million). The new refinancing facility will be repayable over five years.

•  In June 2020, we entered into a loan facility agreement with a European financial institution for an amount of up to $70.0 million, in order to partially refinance a facility originally maturing in 2021 (balloon payment of $36.0 million). The new refinancing facility will be repayable over four years.

C.  Newbuild vessel delivery

•  On July 24, 2020, we accepted delivery of the 12,690 TEU containership YM Triumph, the first of a series of five vessels ordered in May 2018. On July 25, 2020, the vessel commenced its ten-year charter with Yang Ming. YM Triumph, as well as the other four sister vessels currently under construction have secured pre and post delivery financing.

D.  Vessel Disposals

•  In July 2020, we concluded the sale of the 1997-built, 7,403 TEU sister containerships Kawasaki and Kokura.

E.  Dividend announcements

•  On July 1, 2020, we declared a dividend for the quarter ended June 30, 2020, of $0.10 per share on our common stock, payable on August 7, 2020, to stockholders of record of common stock as of July 22, 2020.

•  On July 1, 2020, 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 July 15, 2020 to holders of record as of July 14, 2020.

Mr. Gregory Zikos, Chief Financial Officer of Costamare Inc., commented:

“During the second quarter the Company delivered strong results.

Liquidity stood at around $220 million and, as already announced, during the second quarter of the year we concluded our refinancing program, resulting in a smooth repayment profile with no meaningful debt maturities until 2024.

On the market side, laid up capacity has started decreasing, indicating improving market conditions. Demand continues to favor the larger and medium sizes, and especially ships above 8,000 TEUs. Market activity has picked up and we have chartered in total 24 ships during the quarter.

After months of inactivity the demolition market has re-opened and, as part of our fleet renewal program, we have sold for demolition two 7,400 TEU ships which we plan to replace with younger tonnage.”

Financial Summary

Six-month period ended June 30,
Three-month period ended June 30,
(Expressed in thousands of U.S. dollars, except share and per share data): 2019    2020  2019 2020
Voyage revenue $ 230,010 $ 233,273 $ 117,036 $ 111,869
Accrued charter revenue (1) $ 191 $ 7,721 $ 2,040 $ 7,025
Amortization of Time-charter assumed $ 95 $ 95 $ 48 $ 47
Voyage revenue adjusted on a cash basis (2) $ 230,296 $ 241,089 $ 119,124 118,941
Adjusted Net Income available to common stockholders (3) $ 39,795 $ 64,265 $ 26,215 $ 31,705
Weighted Average number of shares 113,540,975 119,927,560 114,040,870 120,319,180
Adjusted Earnings per share (3) $ 0.35 $ 0.54 $ 0.23 $ 0.26
Net Income / (Loss) $ 27,136 ($ 43,447 ) $ 28,790 ($ 76,223 )
Net Income / (Loss) available to common stockholders $ 11,589 ($ 58,289 ) $ 20,886 ($ 83,913 )
Weighted Average number of shares 113,540,975 119,927,560 114,040,870 120,319,180
Earnings / (Losses) per share $ 0.10 ($ 0.49 ) $ 0.18 ($ 0.70 )

(1) Accrued charter revenue represents the difference between cash received during the period and revenue recognized on a straight-line basis. In the early years of a charter with escalating charter rates, voyage revenue will exceed cash received during the period and during the last years of such charter cash received will exceed revenue recognized on a straight-line basis.
(2) Voyage revenue adjusted on a cash basis represents Voyage revenue after adjusting for non-cash “Accrued charter revenue” recorded under charters with escalating charter rates. However, Voyage revenue adjusted on a cash basis is not a recognized measurement under U.S. generally accepted accounting principles (“GAAP”). We believe that the presentation of Voyage revenue adjusted on a cash basis is useful to investors because it presents the charter revenue for the relevant period based on the then current daily charter rates. The increases or decreases in daily charter rates under our charter party agreements are described in the notes to the “Fleet List” below.
(3) Adjusted Net Income available to common stockholders and Adjusted Earnings per Share are non-GAAP measures. Refer to the reconciliation of Net Income to Adjusted Net Income.

Non-GAAP Measures

The Company reports its financial results in accordance with U.S. GAAP. However, management believes that certain non-GAAP financial measures used in managing the business may provide users of these financial measures additional meaningful comparisons between current results and results in prior operating periods. Management believes that these non-GAAP financial measures can provide additional meaningful reflection of underlying trends of the business because they provide a comparison of historical information that excludes certain items that impact the overall comparability. Management also uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company’s performance. The tables below set out supplemental financial data and corresponding reconciliations to GAAP financial measures for the three and the six-month periods ended June 30, 2020 and 2019. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, voyage revenue or net income as determined in accordance with GAAP. Non-GAAP financial measures include (i) Voyage revenue adjusted on a cash basis (reconciled above), (ii) Adjusted Net Income available to common stockholders and (iii) Adjusted Earnings per Share.

Exhibit I
Reconciliation of Net Income to Adjusted Net Income available to common stockholders and Adjusted Earnings per Share

Six-month period ended
June 30,
Three-month period ended
June 30,
(Expressed in thousands of U.S. dollars, except share and per share data) 2019   2020   2019   2020
Net Income / (Loss) $ 27,136 $ (43,447 ) $ 28,790 $ (76,223 )
Earnings allocated to Preferred Stock (15,547 ) (15,461 ) (7,904 ) (7,768 )
Gain on retirement of Preferred Stock 619 78
Net Income / (Loss) available to common stockholders 11,589 (58,289 ) 20,886 (83,913 )
Accrued charter revenue 191 7,721 2,040 7,025
General and administrative expenses – non-cash component 1,545 1,508 767 832
Amortization of prepaid lease rentals, net 4,042 2,033
Amortization of Time charter assumed 95 95 48 47
Realized (Gain) / loss on Euro/USD forward contracts (1) 208 (78 ) 112 (54 )
Vessels’ impairment loss 3,042 31,577 28,506
(Gain) / Loss on sale / disposals of vessels 18,420 (10 )
Non-recurring, non-cash write-off of loan deferred financing costs 478 478
Loss on sale / disposal of vessel by a jointly owned company with York included in equity gain on investments 38 38
Loss on vessels held for sale 79,197 78,965
(Gain) / loss on derivative instruments, excluding interest accrued and realized on non-hedging derivative instruments (1) 625 2,066 291 (181 )
Adjusted Net Income available to common stockholders $ 39,795 $ 64,265 $ 26,215 $ 31,705
Adjusted Earnings per Share $ 0.35 $ 0.54 $ 0.23 $ 0.26
Weighted average number of shares 113,540,975 119,927,560 114,040,870 120,319,180

Adjusted Net Income available to common stockholders and Adjusted Earnings per Share represent Net Income after earnings allocated to preferred stock and gain on retirement of preferred stock, but before non-cash “Accrued charter revenue” recorded under charters with escalating charter rates, realized (gain)/loss on Euro/USD forward contracts, vessels’ impairment loss, (gain)/loss on sale / disposal of vessels, loss on vessels held for sale, loss on sale / disposal of vessel by a jointly owned company with York included in equity gain on investments, non-recurring, non-cash write-off of loan deferred financing costs, general and administrative expenses – non-cash component, amortization of prepaid lease rentals, net, amortization of Time charter assumed and non-cash changes in fair value of derivatives. “Accrued charter revenue” is attributed to the timing difference between the revenue recognition and the cash collection. However, Adjusted Net Income available to common stockholders and Adjusted Earnings per Share are not recognized measurements under U.S. GAAP. We believe that the presentation of Adjusted Net Income available to common stockholders and Adjusted Earnings per Share are useful to investors because they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. We also believe that Adjusted Net Income available to common stockholders and Adjusted Earnings per Share are useful in evaluating our ability to service additional debt and make capital expenditures. In addition, we believe that Adjusted Net Income available to common stockholders and Adjusted Earnings per Share are useful in evaluating our operating performance and liquidity position compared to that of other companies in our industry because the calculation of Adjusted Net Income available to common stockholders and Adjusted Earnings per Share generally eliminates the effects of the accounting effects of capital expenditures and acquisitions, certain hedging instruments and other accounting treatments, items which may vary for different companies for reasons unrelated to overall operating performance and liquidity. In evaluating Adjusted Net Income available to common stockholders and Adjusted Earnings per Share, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted Net Income available to common stockholders and Adjusted Earnings per Share should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

(1) Items to consider for comparability include gains and charges. Gains positively impacting Net Income available to common stockholders are reflected as deductions to Adjusted Net Income available to common stockholders. Charges negatively impacting Net Income available to common stockholders are reflected as increases to Adjusted Net Income available to common stockholders.

Results of Operations

Three-month period ended June 30, 2020 compared to the three-month period ended June 30, 2019

During the three-month periods ended June 30, 2020 and 2019, we had an average of 60.0 and 60.0 vessels, respectively, in our fleet. In the three-month periods ended June 30, 2020 and 2019, our fleet ownership days totaled 5,460 and 5,460 days, respectively. Ownership days are one of the primary drivers of voyage revenue and vessels’ operating expenses and represent the aggregate number of days in a period during which each vessel in our fleet is owned.

(Expressed in millions of U.S. dollars,
except percentages)
Three-month period
ended June 30,
Percentage
2019 2020 Change Change
Voyage revenue $ 117.0 $ 111.9 $ (5.1 ) (4.4 %)
Voyage expenses (0.6 ) (1.6 ) 1.0 166.7 %
Voyage expenses – related parties (1.0 ) (1.5 ) 0.5 50.0 %
Vessels’ operating expenses (28.2 ) (26.9 ) (1.3 ) (4.6 %)
General and administrative expenses (1.4 ) (2.4 ) 1.0 71.4 %
Management fees – related parties (5.3 ) (5.2 ) (0.1 ) (1.9 %)
General and administrative expenses – non-cash component (0.8 ) (0.8 )
Amortization of dry-docking and special survey costs (2.2 ) (2.3 ) 0.1 4.5 %
Depreciation (29.9 ) (27.6 ) (2.3 ) (7.7 %)
Loss on vessels held for sale (79.0 ) 79.0 n.m.
Vessel’s impairment loss (28.5 ) 28.5 n.m.
Foreign exchange gain / (losses) 0.1 (0.1 ) (0.2 ) n.m.
Interest income 0.9 0.5 (0.4 ) (44.4 %)
Interest and finance costs (22.4 ) (16.9 ) (5.5 ) (24.6 %)
Income from equity method investments 2.6 4.1 1.5 57.7 %
Other 0.3 (0.1 ) (0.4 ) n.m.
Gain / (Loss) on derivative instruments (0.3 ) 0.2 0.5 166.7 %
Net Income / (Loss) $ 28.8 $ (76.2 )
(Expressed in millions of U.S. dollars,
except percentages)
Three-month period
ended June 30,

Percentage
2019
2020
Change Change
Voyage revenue $ 117.0 $ 111.9 $ (5.1 ) (4.4 %)
Accrued charter revenue 2.0 7.0 5.0 250.0 %
Amortization of time charter assumed 0.1 0.1
Voyage revenue adjusted on a cash basis (1) $ 119.1 $ 119.0 $ (0.1 ) (0.1 %)
Vessels’ operational data Three-month period ended June 30, Percentage
2019
2020
Change Change
Average number of vessels 60.0 60.0
Ownership days 5,460 5,460
Number of vessels under dry-docking 3 1 (2 )

(1) Voyage revenue adjusted on a cash basis is not a recognized measurement under U.S. generally accepted accounting principles (“GAAP”). Refer to “Financial Summary” above for the reconciliation of Voyage revenue adjusted on a cash basis.

Voyage Revenue

Voyage revenue decreased by 4.4%, or $5.1 million, to $111.9 million during the three-month period ended June 30, 2020, from $117.0 million during the three-month period ended June 30, 2019. The decrease is mainly attributable to revenue not earned by three vessels sold during the fourth quarter of 2019 and one vessel sold during the first quarter of 2020 and to the increased idle days of our fleet during the second quarter of 2020 compared to the second quarter of 2019; partly-offset (i) by revenue earned by three vessels acquired during the fourth quarter of 2019 and one vessel acquired during the first quarter of 2020 and (ii) increased charter rates for certain of our vessels during the second quarter of 2020 compared to the second quarter of 2019.

Voyage revenue adjusted on a cash basis (which eliminates non-cash “Accrued charter revenue”), decreased by 0.1%, or $0.1 million, to $119.0 million during the three-month period ended June 30, 2020, from $119.1 million during the three-month period ended June 30, 2019. Accrued charter revenue was a positive amount of $7.0 million and $2.0 million for the three-month periods ended June 30, 2020 and June 30, 2019, respectively.

Voyage Expenses

Voyage expenses were $1.6 million and $0.6 million for the three-month periods ended June 30, 2020 and 2019, 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 $1.5 million and $1.0 million for the three-month periods ended June 30, 2020 and 2019, respectively. Voyage expenses – related parties represent fees of 1.25%1 in the aggregate on voyage revenues charged by related managers and charter brokerage fees payable to a related charter brokerage company of amount less than $0.1 million, in the aggregate.

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 $26.9 million and $28.2 million during the three-month periods ended June 30, 2020 and 2019, respectively. Daily vessels’ operating expenses were $4,925 and $5,165 for the three-month periods ended June 30, 2020 and 2019, 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 $2.4 million and $1.4 million during the three-month periods ended June 30, 2020 and 2019, respectively, and both include $0.63 million paid to a related manager.

Management Fees – related parties

Management fees paid to our related managers were $5.2 million and $5.3 million during the three-month periods ended June 30, 2020 and 2019, respectively.

General and administrative expenses – non-cash component

General and administrative expenses – non-cash component for the three-month period ended June 30, 2020 amounted to $0.8 million, representing the value of the shares issued to a related manager on June 30, 2020. General and administrative expenses – non-cash component for the three-month period ended June 30, 2019, amounted to $0.8 million, representing the value of the shares issued to a related manager on June 28, 2019.

Amortization of dry-docking and special survey

Amortization of deferred dry-docking and special survey costs was $2.3 million and $2.2 million during the three-month periods ended June 30, 2020 and 2019, respectively. During the three-month period ended June 30, 2020, one vessel underwent and completed its special survey. During the three-month period ended June 30, 2019, three vessels underwent and completed their special survey.

Depreciation

Depreciation expense for the three-month period ended June 30, 2020 and 2019 was $27.6 million and $29.9 million, respectively.

Loss on vessels held for sale

During the three-month period ended June 30, 2020, we recorded a loss of $78.7 million on three vessels that were classified as vessels held for sale as at June 30, 2020 and an additional loss of $0.3 million on one vessel that was classified as vessel held for sale as at December 31, 2019, representing the expected loss from their sale during the next twelve-month period.

Vessel’s impairment loss

During the three-month period ended June 30, 2020, we recorded an impairment loss in relation to two of our vessels in the amount of $28.5 million. During the three-month period ended June 30, 2019, no impairment loss was recorded.

Interest Income

Interest income amounted to $0.5 million and $0.9 million for the three-month periods ended June 30, 2020 and 2019, respectively.

Interest and Finance Costs

Interest and finance costs were $16.9 million and $22.4 million during the three-month periods ended June 30, 2020 and 2019, respectively. The decrease is mainly attributable to the decreased financing cost and the reduced average loan balances during the three-month period ended June 30, 2020 compared to the three-month period ended June 30, 2019.

Income from Equity Method Investments

During the three-month period ended June 30, 2020, we recorded an income from the equity method investments of $4.1 million representing our share of the income in jointly owned companies pursuant to the Framework Deed dated May 15, 2013, as amended and restated (the “Framework Deed”), with York. As of June 30, 2020, 13 companies are jointly-owned with York (of which, 10 companies currently own vessels). During the three-month period ended June 30, 2019, we recorded an income from equity method investments of $2.6 million also relating to investments under the Framework Deed.

Gain/(Loss) on Derivative Instruments

The fair value of our nine-interest rate derivative instruments which were outstanding as of June 30, 2020 equates to the amount that would be paid by us or to us should those instruments be terminated. As of June 30, 2020, the fair value of these nine-interest rate derivative instruments in aggregate amounted to liability of $10.0 million. The change in the fair value of the interest rate derivative instruments that qualified for hedge accounting is recorded in “Other Comprehensive Income” (“OCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings and is presented in the same income statement line item as the earnings effect of the hedged item while the change in the fair value of the interest rate derivatives representing hedge components excluded from the assessment of effectiveness are recognized currently in earnings and are presented in the same line of the income statement expected for the hedged item. 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 June 30, 2020, a loss of $2.1 million has been included in OCI and a gain of $0.1 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 June 30, 2020.

________________________
1 0.75% until June 30, 2019

Cash Flows

Three-month periods ended June 30, 2020 and 2019

Condensed cash flows Three-month period ended
June 30,
(Expressed in millions of U.S. dollars) 2019 2020
Net Cash Provided by Operating Activities $ 59.4 $ 71.5
Net Cash Used in Investing Activities $ (5.3 ) $ (3.1 )
Net Cash Provided by / (Used in) Financing Activities $ 74.4 $ (104.7 )

Net Cash Provided by Operating Activities

Net cash flows provided by operating activities for the three-month period ended June 30, 2020, increased by $12.1 million to $71.5 million, from $59.4 million for the three-month period ended June 30, 2019. The increase is mainly attributable to favorable change in working capital position, excluding the current portion of long-term debt and the accrued charter revenue (representing the difference between cash received in that period and revenue recognized on a straight-line basis) of $2.0 million and the decreased payments for interest (including swap payments) of $5.4 million during the three-month period ended June 30, 2020 compared to the three-month period ended June 30, 2019; partly off-set by the increased special survey costs of $0.3 million during the three-month period ended June 30, 2020 compared to the three-month period ended June 30, 2019.

Net Cash Used in Investing Activities

Net cash used in investing activities was $3.1 million in the three-month period ended June 30, 2020, which mainly consisted by payments for upgrades for certain of our vessels; partly off-set by return of capital we received from nine entities jointly -owned with York pursuant to the Framework Deed and advance payments we received from the sale of two vessels that were classified as vessels held for sale as at June 30, 2020.

Net cash used in investing activities was $5.3 million in the three-month period ended June 30, 2019, which mainly consisted of advance payments for upgrades for certain of our vessels and return of capital we received from an entity jointly -owned with York pursuant to the Framework Deed.

Net Cash Provided by / (Used in) Financing Activities

Net cash used in financing activities was $104.7 million in the three-month period ended June 30, 2020, which mainly consisted of (a) $85.9 million net payments relating to our debt financing agreements, (b) $9.1 million we paid for dividends to holders of our common stock for the first quarter of 2020 and (c) $0.9 million we paid for dividends to holders of our 7.625% Series B Cumulative Redeemable Perpetual Preferred Stock (“Series B Preferred Stock”), $2.1 million we paid for dividends to holders of our 8.500% Series C Cumulative Redeemable Perpetual Preferred Stock (“Series C Preferred Stock”), $2.2 million we paid for dividends to holders of our 8.75% Series D Cumulative Redeemable Perpetual Preferred Stock (“Series D Preferred Stock”) and $2.5 million we paid for dividends to holders of our 8.875% Series E Cumulative Redeemable Perpetual Preferred Stock (“Series E Preferred Stock”) for the period from January 15, 2020 to April 14, 2020.

Net cash provided by financing activities was $74.4 million in the three-month period ended June 30, 2019, which mainly consisted of (a) $90.5 million of net proceeds relating to our debt financing agreements, (b) $6.9 million we paid for dividends to holders of our common stock for the first quarter of 2019 and (c) $1.0 million we paid for dividends to holders of our 7.625% Series B Preferred Stock, $2.1 million we paid for dividends to holders of our 8.500% Series C Preferred Stock, $2.2 million we paid for dividends to holders of our 8.75% Series D Preferred Stock and $2.5 million we paid for dividends to holders of our 8.875% Series E Preferred Stock for the period from January 15, 2019 to April 14, 2019.

Six-month period ended June 30, 2020 compared to the six-month period ended June 30, 2019

During the six-month periods ended June 30, 2020 and 2019, we had an average of 60.1 and 61.0 vessels, respectively, in our fleet. In the six-month period ended June 30, 2020, we accepted delivery of the secondhand containership JPO Virgo with a TEU capacity of 4,258 and we sold the containership vessel Neapolis with a TEU capacity of 1,645. In the six-month period ended June 30, 2019, we sold the container vessels MSC Pylos and Piraeus with an aggregate capacity of 7,012 TEU. In the six-month periods ended June 30, 2020 and 2019, our fleet ownership days totaled 10,935 and 11,035 days, respectively. Ownership days are one of the primary drivers of voyage revenue and vessels’ operating expenses and represent the aggregate number of days in a period during which each vessel in our fleet is owned.

(Expressed in millions of U.S. dollars,
except percentages)
Six-month period ended June 30, Percentage
2019 2020 Change Change
Voyage revenue $ 230.0 $ 233.3 $ 3.3 1.4 %
Voyage expenses (2.5 ) (4.1 ) 1.6 64.0 %
Voyage expenses – related parties (2.0 ) (3.1 ) 1.1 55.0 %
Vessels’ operating expenses (58.2 ) (54.8 ) (3.4 ) (5.8 %)
General and administrative expenses (2.7 ) (3.8 ) 1.1 40.7 %
Management fees – related parties (10.8 ) (10.5 ) (0.3 ) (2.8 %)
General and administrative expenses – non-cash component (1.5 ) (1.5 )
Amortization of dry-docking and special survey costs (4.5 ) (4.5 )
Depreciation (59.7 ) (55.7 ) (4.0 ) (6.7 %)
Gain / (Loss) on sale / disposal of vessels (18.4 ) (18.4 ) n.m.
Loss on vessels held for sale (79.2 ) 79.2 n.m.
Vessels’ impairment loss (3.0 ) (31.6 ) 28.6 n.m.
Foreign exchange losses (0.2 ) 0.2 n.m.
Interest income 1.7 1.2 (0.5 ) (29.4 %)
Interest and finance costs (45.3 ) (35.4 ) (9.9 ) (21.9 %)
Income from equity method investments 4.3 8.2 3.9 90.7 %
Other 0.3 0.4 0.1 33.3 %
Loss on derivative instruments (0.6 ) (2.1 ) 1.5 250.0 %
Net Income / (Loss) $ 27.1 $ (43.4 )
(Expressed in millions of U.S. dollars,
except percentages)
Six-month period ended June 30,
Percentage
2019
2020
Change Change
Voyage revenue $ 230.0 $ 233.3 $ 3.3 1.4 %
Accrued charter revenue 0.2 7.7 7.5 n.m.
Amortization of time charter assumed 0.1 0.1
Voyage revenue adjusted on a cash basis (1) $ 230.3 $ 241.1 $ 10.8 4.7 %
Vessels’ operational data Six-month period ended June 30, Percentage
2019
2020
Change Change
Average number of vessels 61.0 60.1 (0.9 ) (1.5 %)
Ownership days 11,035 10,935 (100 ) (0.9 %)
Number of vessels under dry-docking 6 7

(1) Voyage revenue adjusted on a cash basis is not a recognized measurement under U.S. generally accepted accounting principles (“GAAP”). Refer to “Financial Summary” above for the reconciliation of Voyage revenue adjusted on a cash basis.

Voyage Revenue

Voyage revenue increased by 1.4%, or $3.3 million, to $233.3 million during the six-month period ended June 30, 2020, from $230.0 million during the six-month period ended June 30, 2019. The increase is mainly attributable to revenue earned by (i) three vessels acquired during the fourth quarter of 2019 and one vessel acquired during the first quarter of 2020, (ii) increased charter rates for certain of our vessels during the six-month period ended June 30, 2020 compared to the six-month period ended June 30, 2019; partly off-set by revenue not earned by five vessels sold during the year ended December 31, 2019 and one vessel sold during the first quarter of 2020 and by increased idle days of our fleet during the six-month period ended June 30, 2020 compared to the six-month period ended June 30, 2019.

Voyage revenue adjusted on a cash basis (which eliminates non-cash “Accrued charter revenue”), increased by 4.7%, or $10.8 million, to $241.1 million during the six-month period ended June 30, 2020, from $230.3 million during the six-month period ended June 30, 2019. Accrued charter revenue was a positive amount of $7.7 million and $0.2 million for the six-month period ended June 30, 2020 and June 30, 2019, respectively.

Voyage Expenses

Voyage expenses were $4.1 million and $2.5 million for the six-month periods ended June 30, 2020 and 2019, 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 $3.1 million and $2.0 million for the six-month periods ended June 30, 2020 and 2019, respectively. Voyage expenses – related parties represent fees of 1.25%2 in the aggregate on voyage revenues charged by related managers and charter brokerage fees payable to a related charter brokerage company of amount approximately $0.18 million, in the aggregate.

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 $54.8 million and $58.2 million during the six-month periods ended June 30, 2020 and 2019, respectively. Daily vessels’ operating expenses were $5,008 and $5,271 for the six-month periods ended June 30, 2020 and 2019, 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 $3.8 million and $2.7 million during the six-month periods ended June 30, 2020 and 2019, respectively, and both include $1.3 million paid to a related manager.

Management Fees – related parties

Management fees paid to our related managers were $10.5 million and $10.8 million during the six-month periods ended June 30, 2020 and 2019, respectively.

General and administrative expenses – non-cash component

General and administrative expenses – non-cash component for the six-month period ended June 30, 2020 amounted to $1.5 million, representing the value of the shares issued to a related manager on March 30, 2020 and June 30, 2020. General and administrative expenses – non-cash component for the six-month period ended June 30, 2019, amounted to $1.5 million, representing the value of the shares issued to a related manager on March 29, 2019 and June 28, 2019.

Amortization of dry-docking and special survey

Amortization of deferred dry-docking and special survey costs was $4.5 million and $4.5 million during the six-month periods ended June 30, 2020 and 2019, respectively. During the six-month period ended June 30, 2020, seven vessels underwent and completed their special survey. During the six-month period ended June 30, 2019, six vessels underwent and completed their special survey.

Depreciation

Depreciation expense for the six-month period ended June 30, 2020 and 2019 was $55.7 million and $59.7 million, respectively.

Gain / (Loss) on sale / disposal of vessels

During the six-month period ended June 30, 2020, we recorded a gain of $0.01 million from the sale of the vessel Neapolis which was classified as asset held for sale as at December 31, 2019. During the six-month period ended June 30, 2019, we recorded an aggregate loss of $18.4 million from the sale of the container vessels Piraeus and MSC Pylos. MSC Pylos was classified as asset held for sale as at December 31, 2018.

Loss on vessels held for sale

During the six-month period ended June 30, 2020, we recorded a loss of $78.7 million on three vessels that were classified as vessels held for sale as at June 30, 2020 and an additional loss of $0.5 million on one vessel that was classified as vessel held for sale as at December 31, 2019, representing the expected loss from their sale during the next twelve-month period.

Vessels’ impairment loss

During the six-month period ended June 30, 2020, we recorded an impairment loss in relation to five of our vessels in the amount of $31.6 million, in the aggregate. During the six-month period ended June 30, 2019, we recorded an impairment loss in relation to two of our vessels in the amount of $3.0 million, in the aggregate.

Interest Income

Interest income amounted to $1.2 million and $1.7 million for the six-month periods ended June 30, 2020 and 2019, respectively.

Interest and Finance Costs

Interest and finance costs were $35.4 million and $45.3 million during the six-month periods ended June 30, 2020 and 2019, respectively. The decrease is mainly attributable to the decreased financing cost and the reduced loan balances during the six-month period ended June 30, 2020 compared to the six-month period ended June 30, 2019.

Income from Equity Method Investments

During the six-month period ended June 30, 2020, we recorded an income from the equity method investments of $8.2 million representing our share of the income in jointly owned companies pursuant to the Framework Deed dated May 15, 2013, as amended and restated (the “Framework Deed”), with York. As of June 30, 2020, 13 companies are jointly-owned with York (of which, 10 companies currently own vessels). During the six-month period ended June 30, 2019, we recorded an income from equity method investments of $4.3 million also relating to investments under the Framework Deed.

Loss on Derivative Instruments

The fair value of our nine-interest rate derivative instruments which were outstanding as of June 30, 2020 equates to the amount that would be paid by us or to us should those instruments be terminated. As of June 30, 2020, the fair value of these nine-interest rate derivative instruments in aggregate amounted to liability of $10.0 million. The change in the fair value of the interest rate derivative instruments that qualified for hedge accounting is recorded in “Other Comprehensive Income” (“OCI”) and reclassified into earnings in the same period  or periods during which the hedged transaction affects earnings and is presented in the same income statement line item as the earnings effect of the hedged item while the change in the fair value of the interest rate derivatives representing hedge components excluded from the assessment of effectiveness are recognized currently in earnings and are presented in the same line of the income statement expected for the hedged item. 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 six-month period ended June 30, 2020, a loss of $8.1 million has been included in OCI and a net loss of $2.1 million has been included in 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 six-month period ended June 30, 2020.

________________________
2 0.75% until June 30, 2019

Cash Flows

Six-month periods ended June 30, 2020 and 2019

Condensed cash flows Six-month period ended
June 30,
(Expressed in millions of U.S. dollars) 2019
2020
Net Cash Provided by Operating Activities $ 107.2 $ 139.2
Net Cash Provided by Investing Activities $ 9.3 $ 1.6
Net Cash Provided by / (Used in) Financing Activities $ 0.9 $ (135.5 )

Net Cash Provided by Operating Activities

Net cash flows provided by operating activities for the six-month period ended June 30, 2020, increased by $32.0 million to $139.2 million, from $107.2 million for the six-month period ended June 30, 2019. The increase is mainly attributable to the increased cash from operations of $10.8 million, the favorable change in working capital position, excluding the current portion of long-term debt and the accrued charter revenue (representing the difference between cash received in that period and revenue recognized on a straight-line basis) of $6.0 million and the decreased payments for interest (including swap payments) of $10.1 million during the six-month period ended June 30, 2020 compared to the six-month period ended June 30, 2019; partly off-set by the increased special survey costs of $3.7 million during the six-month period ended June 30, 2020 compared to the six-month period ended June 30, 2019.

Net Cash Provided by Investing Activities

Net cash provided by investing activities was $1.6 million in the six-month period ended June 30, 2020, which mainly consisted of return of capital we received from nine entities jointly -owned with York pursuant to the Framework Deed, the proceeds we received from the sale of one vessel and advance payments we received from the sale of two vessels that were classified as vessels held for sale as at June 30, 2020; partly off-set by payments for upgrades for certain of our vessels and payment for the acquisition of one secondhand vessel.

Net cash provided by investing activities was $9.3 million in the six-month period ended June 30, 2019, which mainly consisted of proceeds we received from the sale of two vessels, return of capital we received from an entity jointly owned with York pursuant to the Framework Deed and advance payments for upgrades for certain of our vessels.

Net Cash Used in Financing Activities

Net cash used in financing activities was $135.5 million in the six-month period ended June 30, 2020, which mainly consisted of (a) $100.5 million net payments relating to our debt financing agreements, (b) $15.8 million we paid for dividends to holders of our common stock for the fourth quarter of 2019 and the first quarter of 2020 and (c) $1.9 million we paid for dividends to holders of our 7.625% Series B Preferred Stock, $4.2 million we paid for dividends to holders of our 8.500% Series C Preferred Stock, $4.4 million we paid for dividends to holders of our 8.75% Series D Preferred Stock and $5.1 million we paid for dividends to holders of our 8.875% Series E Preferred Stock for the period from October 15, 2019 to January 14, 2020 and January 15, 2020 to April 14, 2020.

Net cash provided by financing activities was $0.9 million in the six-month period ended June 30, 2019, which mainly consisted of (a) $31.3 million of net proceeds relating to our debt financing agreements (including the prepayments following the sale of two container vessels during the three-month period ended March 31, 2019), (b) $13.4 million we paid for dividends to holders of our common stock for the fourth quarter of 2018 and the first quarter of 2019 and (c) $1.9 million we paid for dividends to holders of our 7.625% Series B Preferred Stock, $4.2 million we paid for dividends to holders of our 8.500% Series C Preferred Stock, $4.4 million we paid for dividends to holders of our 8.75% Series D Preferred Stock and $5.2 million we paid for dividends to holders of our 8.875% Series E Preferred Stock for the period from October 15, 2018 to January 14, 2019 and January 15, 2019 to April 14, 2019.

Liquidity and Unencumbered Vessels

Cash and cash equivalents

As of June 30, 2020, we had a total cash liquidity of $201.1 million, consisting of cash, cash equivalents and restricted cash.

Debt-free vessels

As of July 27, 2020, the following vessels were free of debt.

Unencumbered Vessels
(Refer to fleet list for full details)
Vessel Name Year
Built
TEU
Capacity
ETOILE 2005 2,556
MICHIGAN 2008 1,300
ENSENADA (*) 2001 5,576
MONEMVASIA (*) 1998 2,472
ARKADIA (*) 2001 1,550

(*) Vessels acquired pursuant to the Framework Deed with York.

 

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