Capital Product Partners sees net income rise 239% in 1Q2024

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Capital Product Partners released its financial results for the first quarter ended March 31, 2024.

Highlights

 Three-month periods ended March 31,
 20242023Increase / (Decrease)
Revenues$104.5 million$81.0 million29%
Expenses$54.9 million$45.1 million22%
Interest expense and finance cost$34.0 million$23.7 million43%
Net Income$33.9 million$10.0 million239%
Adjusted Net Income (excluding gain on sale of vessels)1$17.5 million$10.0 million75%
Net Income per common unit$0.61$0.4924%
Adjusted Net Income per common unit (excluding gain on sale of vessels)1$0.32$0.49(35%)
Average number of vessels223.321.49%
  • Operating Surplus3 and Operating Surplus after the quarterly allocation to the capital reserve for the first quarter of 2024 were $48.3 million and $9.6 million, respectively.
  • Announced common unit distribution of $0.15 for the first quarter of 2024.
  • On January 2, 2024, the Partnership took delivery of the LNG/C Axios II. This is the second delivery under the Partnership’s agreement to acquire 11 latest generation two-stroke (MEGA) Liquefied Natural Gas Carriers (“LNG/C and the “LNG/C Transaction”), which closed on December 21, 2023.
  • Concluded the sale of the M/V Long Beach Express and the M/V Akadimos recognizing a gain on sale of $16.4 million.
  • Entered into memoranda of agreement for the sale of five additional container vessels.

1 Adjusted Net Income (excluding gain on sale of vessels) and Adjusted Net Income per common unit (excluding gain on sale of vessels) are non-GAAP financial measures used to measure the financial performance of the Partnership and we believe these non-GAAP measures are useful to analysts and investors in comparing the results of operations between periods. These non-GAAP measures are not required by accounting principles generally accepted in the United States (“GAAP”) and should not be considered a substitute for Net income and Net Income per common unit prepared in accordance with GAAP or as a measure of profitability.

2 Average number of vessels is measured by aggregating the number of days each vessel was part of our fleet during the period and dividing such aggregate number by the number of calendar days in the period.

3 Operating surplus is a non-GAAP financial measure used by certain investors to measure the financial performance of the Partnership and other limited partnerships. Please refer to Appendix A at the end of the press release for a reconciliation of this non-GAAP measure with net income.

Overview of First Quarter 2024 Results

Net income for the quarter ended March 31, 2024, was $33.9 million or $17.5 million excluding the gain on sale of vessels, compared with net income of $10.0 million for the first quarter of 2023. Taking into account the interest attributable to the general partner, net income per common unit for the quarter ended March 31, 2024, was $0.61 or $0.32 excluding the gain on sale of vessels, compared to net income per common unit of $0.49 for the first quarter of 2023.

Total revenue for the quarter ended March 31, 2024, was $104.5 million, compared to $81.0 million during the first quarter of 2023. The increase in revenue was primarily attributable to the revenue contributed by the newbuild vessels acquired by the Partnership, namely the LNG/C Asterix acquired on February 17, 2023, the M/V Buenaventura Express acquired on June 20, 2023, the LNG/C Amore Mio I acquired on December 21, 2023 and the LNG/C Axios II acquired on January 2, 2024, partly offset by the sale of the M/V Cape Agamemnon on November 7, 2023, the sale of the M/V Long Beach Express on February 26, 2024 and the sale of M/V Akadimos on March 8, 2024.

Total expenses for the quarter ended March 31, 2024, were $54.9 million, compared to $45.1 million in the first quarter of 2023. Total vessel operating expenses during the first quarter of 2024 amounted to $22.7 million, compared to $19.3 million during the first quarter of 2023. The increase in vessel operating expenses was mainly due to the net increase in the average number of vessels in our fleet. Total expenses for the first quarter of 2024 also include vessel depreciation and amortization of $24.0 million, compared to $19.2 million in the first quarter of 2023. The increase in depreciation and amortization during the first quarter of 2024 was mainly attributable to the net increase in the average size of our fleet. General and administrative expenses for the first quarter of 2024 increased to $4.4 million, compared to $2.8 million in the first quarter of 2023, mainly attributable to the increase in the costs we recognized in connection with our equity incentive plan.

Total other expense, net for the quarter ended March 31, 2024, was $32.1 million compared to $25.8 million for the first quarter of 2023. Total other expense, net includes interest expense and finance cost of $34.0 million for the first quarter of 2024, compared to $23.7 million for the first quarter of 2023. The increase in interest expense and finance cost was mainly attributable to the increase in the Partnership’s average indebtedness and the increase in the weighted average interest rate compared to the first quarter of 2023.

Capitalization of the Partnership

As of March 31, 2024, total cash amounted to $157.7 million. Total cash includes restricted cash of $11.2 million, which represents the minimum liquidity requirement under our financing arrangements.

As of March 31, 2024, total partners’ capital amounted to $1,203.9 million, an increase of $29.0 million compared to $1,174.9 million as of December 31, 2023. The increase reflects net income for the quarter ended March 31, 2024, other comprehensive income of $0.8 million relating to the net effect of the cross-currency swap agreement we designated as an accounting hedge, the amortization associated with the equity incentive plan of $2.6 million, partly offset by distributions declared and paid during the period in a total amount of $8.3 million.

As of March 31, 2024, the Partnership’s total debt was $1,943.6 million before financing fees, reflecting an increase of $155.8 million compared to $1,787.8 million as of December 31, 2023. The increase is attributable to the assumption of $190.0 million of indebtedness and a drawdown of $92.6 million under the unsecured seller’s credit issued to the Partnership by Capital Maritime & Trading Corp. for an amount of up to $220.0 million to finance a portion of the purchase price for the vessels in the LNG/C Transaction (the “Seller’s Credit”), in connection with the acquisition of the LNG/C Axios II in January 2024, partly offset by the $7.2 million decrease in the U.S. Dollar equivalent of the euro-denominated bonds issued by CPLP Shipping Holdings Plc in July 2022 and October 2021 (the “Bonds”) as of March 31, 2024, the scheduled principal payments for the period of $28.5 million, the early repayment in full of the facility we entered into with ICBC Financial Leasing Co., Ltd in 2020 to partly finance the acquisition of the M/V Akadimos, of a total amount of $38.3 million, and the partial repayment of $52.8 million of the Seller’s Credit that we drew to partly finance the acquisition of LNG/C Axios II.

Operating Surplus

Operating surplus for the quarter ended March 31, 2024, amounted to $48.3 million, compared to $40.5 million for the previous quarter ended December 31, 2023. We allocated $38.7 million to the capital reserve, a decrease of $0.3 million compared to the previous quarter due to the net decrease in the rate of amortization of our debt. Operating surplus for the quarter ended March 31, 2024, after the quarterly allocation to the capital reserve, was $9.6 million. Operating surplus is a non-GAAP financial measure used by certain investors to measure the financial performance of the Partnership and other limited partnerships. Please refer to Appendix A at the end of the press release for a reconciliation of this non-GAAP measure with net income.

Delivery of the LNG/C Axios II

On January 2, 2024, the Partnership took delivery of the LNG/C Axios II. The vessel commenced an index-linked, one-year time charter, which will be followed by a seven-year bareboat charter with Bonny Gas Transport Limited (“BGT”). BGT maintains an option to extend the charter by an additional three years. The vessel acquisition was financed with, a new senior secured loan facility for an amount of $190.0 million, repayable in 28 equal quarterly installments of $2.5 million and a balloon payment of $120.0 million together with the final quarterly installment in December 2030, and a drawdown of $92.6 million under the Seller’s Credit.

Container Divestment Update

Sale of M/V Long Beach Express: On December 15, 2023, the Partnership agreed to sell the M/V Long Beach Express (68,618 DWT / 5,089 TEU, container vessel, built 2008, Hanjin Heavy Industries & Construction Co., Ltd., South Korea) to an unaffiliated party. Delivery of the M/V Long Beach Express to its new owner took place on February 26, 2024.

Sale of Three 10,000 TEU Container Vessels: On March 20, 2024, the Partnership announced that it has entered into three separate memoranda of agreement for the sale of the M/V Athos, the M/V Aristomenis and the M/V Athenian (118,888, 118,712 and 118,834 DWT, respectively, 9,954 TEU container vessels, built 2011, Samsung Heavy Industries Co., Ltd., South Korea) to an unaffiliated party. The M/V Athos and the M/V Athenian were delivered to their new owners on April 22, 2024, and the M/V Aristomenis is expected to be delivered in early May 2024.

Sale of M/V Akadimos: On March 4, 2024, the Partnership announced that it has entered into a memorandum of agreement for the sale of the M/V Akadimos (115,534 DWT / 9,288 TEU, Eco-Flex, Wide Beam container vessel, built 2015, Daewoo-Mangalia Heavy Industries S.A., Romania). Delivery of the M/V Akadimos to its new owner took place on March 8, 2024.

Sale of M/V Seattle Express and M/V Fos Express: On March 4, 2024, the Partnership also announced that it has entered into two separate memoranda of agreement for the sale of sister vessels, the M/V Fos Express and the M/V Seattle Express (68,579 and 68,411 DWT, respectively / 5,089 TEU, container vessels, built 2008, Hanjin Heavy Industries & Construction Co., Ltd., South Korea). The M/V Seattle Express was delivered to its new owner on April 26, 2024, while the M/V Fos Express is expected to be delivered in early May 2024.

The expected proceeds from the sale of the M/V Long Beach Express, the M/V Athos, the M/V Aristomenis, the M/V Athenian, the M/V Akadimos, the M/V Seattle Express and the M/V Fos Express after debt repayment are estimated to be approximately $182.5 million in total.

Management Commentary

Mr. Jerry Kalogiratos, Chief Executive Officer of our General Partner, commented:

“I am pleased to see the Partnership’s continued progress in executing the business plan outlined in November 2023. This includes the acquisition of two latest generation LNG/C vessels and the successful sale of five container vessels, with agreements in place for the sale of two additional container vessels. These sales are expected to generate net proceeds of approximately $182.5 million, in line with our announced intention to gradually divest from the container business. Finally, we expect another three-brand new, latest generation LNG/Cs to join our fleet in the coming months, -all with long term charters in place- while we continue to focus on the conversion of the Partnership into a corporation and growing further our footprint in LNG and energy transition gas shipping.”

Quarterly Common Unit Cash Distribution

On April 25, 2024, the Board of Directors of the Partnership declared a cash distribution of $0.15 per common unit for the first quarter of 2024 payable on May 14, 2024, to common unit holders of record on May 7, 2024.