Costamare posts record 2021 profit

Costamare reported unaudited financial results for the fourth quarter (“Q4 2021”) and year ended December 31, 2021.

I.    RECORD PROFITABILITY FOR Q4 2021 AND YEAR ENDED 2021

• Year end Net Income available to common stockholders of $404.1 million ($3.28 per share).
• Q4 2021 Net Income available to common stockholders of $153.4 million ($1.24 per share).
• Year end Adjusted Net Income available to common stockholders¹ of $289.9 million ($2.36 per share).
• Q4 2021 Adjusted Net Income available to common stockholders¹ of $112.1 million ($0.91 per share).
• Year end liquidity of $552 million².

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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.
² Including our share of cash amounting to $5.5 million held in companies co-owned with York Capital Management Advisors LLC (“York”) and $193.3 million of undrawn funds from our two hunting license facilities (adjusted for the $56.7 million already drawn in 2022).

II.    SPECIAL DIVIDEND

• The Company has decided to declare a special dividend of $0.50 per common share. The special dividend will be in addition to the regular first quarter 2022 dividend and will be paid at the same time as, and using the same record date as, the regular first quarter 2022 dividend.

III.    SALE AND PURCHASE ACTIVITY

Vessels Disposals

• Agreement for the sale with forward delivery of the below two containerships (average age 21 years):
  • c/v Maersk Kalamata, 2003-built, 6,644 TEU capacity (latest expected date for the conclusion of the sale in Q1 2023).
  • c/v Sealand Washington, 2000-built, 6,648 TEU capacity (latest expected date for the conclusion of the sale in Q1 2023).

Total gross sale proceeds are estimated to be $150 million, resulting in an estimated capital gain of $95 million.

• Agreement for the sale with forward delivery of the below three containerships (average age 22 years):
  • c/v Sealand Michigan, 2000-built, 6,648 TEU capacity (latest expected date for the conclusion of the sale in Q4 2022).
  • c/v Sealand Illinois, 2000-built, 6,648 TEU capacity (latest expected date for the conclusion of the sale in Q4 2022).
  • c/v York, 2000-built, 6,648 TEU capacity (latest expected date for the conclusion of the sale in Q4 2022).

Total gross sale proceeds are estimated to be $183 million, resulting in an estimated capital gain of $109 million.

• Agreement for the sale of the 1997-built, 2,458 TEU containership Messini. The sale is expected to be concluded in Q1 2022 and will result in an estimated capital gain of $17.8 million.
• Conclusion of the sale of the 2002-built, 4,992 TEU containership ZIM New York, which resulted in a capital gain of approximately $14.0 million.
• Total estimated capital gains from vessel disposals of $235.8 million.

Vessels Acquisitions

• Accepted delivery of the 2008-built, 4,578 TEU containership Dyros (ex. Co Kobe), which commenced its time charter with Maersk for a period of between 24.5 to 27.5 months. The vessel acquisition price was $20.0 million.
• Accepted delivery of another 11 dry bulk vessels (total delivered fleet of 45 vessels), with one additional vessel expected to be delivered in Q1 2022.

IV.    NEW CHARTER ARRANGEMENTS³

• Entered into a total of 35 chartering agreements for our containerships with contracted revenues of $1.4 billion in the aggregate since the beginning of 2021, bringing our contracted revenues to a total of $3.4 billion with a weighted average remaining time charter duration of 4.2 years⁴.

• Selected fixtures of the Company’s containerships since last quarter are shown below:
  • Charter on a forward basis with latest delivery to the charterer in Q4 2023, three 1996-built vessels ranging between 7,400 to 8,000 TEU capacity, for a minimum fixed period of 36 months at a daily rate of $41,500 each. More specifically:
    • c/v Kure of 7,403 TEU capacity and latest delivery to its new charterers in August 2023.
    • c/v Maersk Kleven of 8,044 TEU capacity and latest delivery to its new charterers in October 2023.
    • c/v Maersk Kotka of 8,044 TEU capacity and latest delivery to its new charterers in October 2023.
  • Charter on a forward basis with latest delivery to the charterer in Q4 2022, two 2003-built vessels of 6,500 TEUs for a minimum fixed period of 36 months at a daily rate of $53,000 each. More specifically:
    • c/v Maersk Kolkata of 6,644 TEU capacity and latest delivery to its new charterers in October 2022.
    • c/v Maersk Kingston of 6,644 TEU capacity and latest delivery to its new charterers in October 2022.
  • Charter on a forward basis with latest delivery to the charterer in Q2 2023, two 2009/2010-built vessels of 4,250 TEUs for a minimum fixed period of 60 months at an average daily rate of $43,250 each. More specifically:
    • c/v Vela of 4,258 TEU capacity, latest delivery to its new charterers in April 2023 and at a daily charter rate for the first year of employment at $99,000.
    • c/v Vulpecula of 4,258 TEU capacity, latest delivery to its new charterers in May 2023 and at a daily charter rate for the first year of employment at $99,000.

Total contracted revenues from the above seven fixtures amount to $410 million extending over the next six years⁵.

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³ Please refer to Fleet List tables for additional information on vessels employment details.
⁴ As of March 9, 2022. Total contracted revenues and remaining time charter duration include our share in entities co-owned with York and exclude contracted revenues and time charter duration attributable to our contracted eight newbuilding containerships.
⁵ Assuming the vessels commence their new charters from the latest redelivery dates of their current charterparty agreements.

V.    NEW DEBT FINANCING AND CAPITAL STRUCTURE

• New financing agreements / amendments to existing financing agreements since last quarter in excess of $430 million. More specifically:
  • In December 2021, we signed a loan agreement with a leading European financial institution for an amount of up to $55 million for the purposes of refinancing the then existing indebtedness of five dry bulk carriers. The new facility has a tenor of five years, and will mature in January 2027.
  • In December 2021, we signed a loan agreement with a leading European financial institution for an amount of up to $43.5 million for the purposes of refinancing the then existing indebtedness of four dry bulk carriers. The new facility has a tenor of five years, and will mature in December 2026.
  • In December 2021, we signed a hunting license loan agreement with a European financial institution for an amount of up to $100 million for the purposes of financing the acquisition cost of dry bulk vessels. The availability period of this facility expires in December 2022, an amount of $56.7 million has already been drawn and the facility has a maximum tenor of 5 to 6 years following the expiration of the availability period.
  • In December 2021, we extended the availability period of the $150 million hunting license loan facility agreement, originally signed in September 2021. The new availability period expires in June 2022.
  • In January 2022, we signed a loan agreement with a leading European financial institution for an amount of up to $85 million for the purposes of refinancing the then existing indebtedness of five containerships and for general corporate purposes. The new facility has a tenor of four years and will mature in January 2026.

VI.    SHARE REPURCHASE PROGRAM AND DIVIDEND ANNOUNCEMENTS

• On November 30, 2021, we approved a share repurchase program of up to a maximum $150 million of our common shares and up to a maximum $150 million of our preferred shares. The timing of repurchases and the exact number of shares to be purchased will be determined by the Company’s management, in its discretion.
• On January 3, 2022, we declared a dividend for the quarter ended December 31, 2021, of $0.115 per share on our common stock, which was paid on February 7, 2022, to stockholders of record of common stock as of January 20, 2022.
• On January 3, 2022, we declared a dividend of $0.476563 per share on our Series B Preferred Stock, of $0.531250 per share on our Series C Preferred Stock, of $0.546875 per share on our Series D Preferred Stock and of $0.554688 per share on our Series E Preferred Stock, which were all paid on January 18, 2022 to holders of record as of January 14, 2022.

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

“2021 has been a record year for Costamare. With a fleet of 123 vessels, including 46 dry bulk ships, the Company generated Net Income of above $400 million. As of the end of the year, liquidity stood at $550 million.

On the containerships side, market conditions remained firm with strong demand and logistical disruptions continuing to impact the sector. We chartered a total of 35 secondhand vessels during the year, which added incremental contracted revenues of $1.4 billion. Total contracted revenues amount to $3.4 billion with a weighted average remaining time charter duration of about 4 years.

We have covered substantially all of our containership open days for 2022 and are in the process of arranging employment for the vessels coming off charter next year. At the same time, we agreed to dispose of some older tonnage with forward, year-end deliveries at prices that reflect today’s tight market environment.

Regarding our expansion into the dry bulk shipping business, we entered a market with favorable supply and demand dynamics underpinned by a historically low orderbook. Our dry bulk fleet is currently trading in the spot market generating healthy returns, on the back of timely acquisitions.

In light of the above, the Company has decided to declare a special dividend of $0.50 per common share. While rewarding our shareholders as a result of increased cash flows and profitability, the payment of that dividend is not expected in any way to affect our capacity to continue growing opportunistically in a volatile market environment.”

(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. The reverse is true for charters with descending rates.
(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. 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” tables 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-month periods and years ended December 31, 2021 and 2020. 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

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 or descending charter rates, realized (gain)/loss on Euro/USD forward contracts, vessels’ impairment loss, (gain)/loss on sale / disposal of vessels, net, loss on vessels held for sale, gain on sale / disposal of vessel by a jointly owned company with York included in equity gain on investments, gain on sale of equity securities, swap’s breakage costs, non-recurring, non-cash write-off of loan deferred financing costs, general and administrative expenses – non-cash component, non-cash changes in fair value of derivatives and other non-recurring, non-cash items. “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 December 31, 2021 compared to the three-month period ended December 31, 2020

During the three-month periods ended December 31, 2021 and 2020, we had an average of 108.1 and 60.3 vessels, respectively, in our fleet.

In the three-month period ended December 31, 2021, we sold the container vessels ZIM Shanghai and ZIM New York, with an aggregate TEU capacity of 9,984. Furthermore, during the three-month period ended December 31, 2021, we accepted delivery of 13 secondhand dry bulk vessels (Equity, Cetus (ex. Charm), Curacao, Rose, Bermondi, Titan I, Orion, Greneta, Merchia, Damon, Pythias, Egyptian Mike and Phoenix) with an aggregate DWT of 811,567.

In the three-month period ended December 31, 2020, we accepted delivery of the secondhand container vessel Neokastro with a TEU capacity of 4,178 and we sold the container vessel Singapore Express with a TEU capacity of 4,890.

In the three-month periods ended December 31, 2021 and 2020, our fleet ownership days totaled 9,942 and 5,552 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.

Consolidated Financial Results and vessels’ operational data

Segmental Financial Summary

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

Voyage Revenue

Voyage revenue increased by 138.4%, or $164.8 million, to $283.9 million during the three-month period ended December 31, 2021, from $119.1 million during the three-month period ended December 31, 2020. The increase is mainly attributable to (i) revenue earned by one container vessel acquired during the three-month period ended December 31, 2020, as well as to the 16 container vessels and 41 dry bulk vessels acquired during the year ended December 31, 2021 and (ii) increased charter rates in certain of our container vessels, partly off-set by revenue not earned by five container vessels sold during the year ended December 31, 2021.

Voyage revenue adjusted on a cash basis (which eliminates non-cash “Accrued charter revenue”) increased by 116.6%, or $145.0 million, to $269.4 million during the three-month period ended December 31, 2021, from $124.4 million during the three-month period ended December 31, 2020. Accrued charter revenue for the three-month periods ended December 31, 2021 and 2020 was a negative amount of $14.5 million and a positive amount of $5.3 million, respectively.

Voyage Expenses

Voyage expenses were $5.8 million and $1.0 million for the three-month periods ended December 31, 2021 and 2020, 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 $3.7 million and $1.8 million for the three-month periods ended December 31, 2021 and 2020, respectively. Voyage expenses – related parties represent (i) fees of 1.25%, in the aggregate, on voyage revenues charged by a related manager and a service provider and (ii) charter brokerage fees (in respect of our container vessels) payable to two related charter brokerage companies for an amount of approximately $0.4 million and $0.3 million, in the aggregate, for the three-month periods ended December 31, 2021 and 2020, respectively.

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 $60.6 million and $32.0 million during the three-month periods ended December 31, 2021 and 2020, respectively. Daily vessels’ operating expenses were $6,103 and $5,774 for the three-month periods ended December 31, 2021 and 2020, respectively. The increase in the daily operating expenses during the quarter ended December 31, 2021 is mainly attributable to increased one-time predelivery expenses for the acquisition of dry bulk vessels and increased crew costs related to COVID-19 pandemic measures. 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 $3.4 million and $2.1 million during the three-month periods ended December 31, 2021 and 2020, respectively, and both include $0.63 million paid to a related manager.

Management Fees – related parties

Management fees paid to our related party managers were $9.7 million and $5.6 million during the three-month periods ended December 31, 2021 and 2020, respectively.

General and Administrative Expenses – non-cash component

General and administrative expenses – non-cash component for the three-month period ended December 31, 2021 amounted to $1.9 million, representing the value of the shares issued to a related party manager on December 30, 2021. General and administrative expenses – non-cash component for the three-month period ended December 31, 2020 amounted to $1.2 million, representing the value of the shares issued to a related party manager on December 30, 2020.

Amortization of Dry-Docking and Special Survey

Amortization of deferred dry-docking and special survey costs was $2.9 million and $2.3 million during the three-month periods ended December 31, 2021 and 2020, respectively. During the three-month period ended December 31, 2021, one vessel underwent and completed her dry-docking and special survey and one vessel was in the process of completing her dry-docking and special survey. During the three-month period ended December 31, 2020, two vessels underwent and completed their dry-docking and special survey.

Depreciation

Depreciation expense for the three-month periods ended December 31, 2021 and 2020 was $40.9 million and $27.1 million, respectively.

Gain on Sale / Disposal of Vessels

During the three-month period ended December 31, 2021, we recorded a gain of $27.8 million from the sale of the container vessels ZIM Shanghai and ZIM New York, which were classified as vessels held for sale at September 30, 2021 (initially classified as vessel held for sale as of June 30, 2021). During the three-month period ended December 31, 2020, we recorded a gain of $0.5 million from the sale of the vessel Singapore Express, which was classified as vessel held for sale at June 30, 2020 and September 30, 2020.

Loss on Vessels Held for Sale

During the three-month period ended December 31, 2021, the container vessels Messini, Sealand Illinois, Sealand Michigan and York were classified as vessels held for sale. No loss on vessels held for sale was recorded during the fourth quarter of 2021, since each vessel’s estimated fair value less costs to sell exceeded each vessel’s carrying value. During the three-month period ended December 31, 2020, the container vessel Halifax Express was classified as vessel held for sale and we recorded a loss on vessel held for sale of $7.7 million, which resulted from its estimated fair value measurement less costs to sell, during the period.

Interest Income

Interest income amounted to nil and $0.4 million for the three-month periods ended December 31, 2021 and 2020, respectively.

Interest and Finance Costs

Interest and finance costs were $25.3 million and $17.2 million during the three-month periods ended December 31, 2021 and 2020, respectively. The increase is mainly attributable to the increased average loan balances during the three-month period ended December 31, 2021 compared to the three-month period ended December 31, 2020, partly off-set by decreased financing cost during the three-month period ended December 31, 2021 compared to the three-month period ended December 31, 2020.

Gain on Sale of Equity Securities

Gain on sale of equity securities of $2.0 million for the three-month period ended December 31, 2021, represents the difference between the aggregate sale price of 1,221,800 ordinary shares of ZIM as compared to their carrying value as at September 30, 2021. ZIM completed its initial public offering and listing on the New York Stock Exchange of its ordinary shares on January 27, 2021.

Income from Equity Method Investments

During the three-month period ended December 31, 2021, we recorded an income from equity method investments of $0.8 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 Capital Management Advisors LLC (“York”). As of December 31, 2021, six companies are jointly owned with York (of which, four companies currently own container vessels). During the three-month period ended December 31, 2020, we recorded an income from equity method investments of $4.0 million relating to investments under the Framework Deed. As of December 31, 2020, 13 companies were jointly owned with York (of which, ten companies owned container vessels). The decreased income from equity method investments in the fourth quarter of 2021 compared to the fourth quarter of 2020 is mainly attributable to the decreased number of container vessels jointly owned with York during the fourth quarter of 2021 compared to the fourth quarter of 2020; partly off-set by the increased profitability of certain jointly owned vessels during the fourth quarter of 2021 compared to the fourth quarter of 2020.

Gain / (loss) on Derivative Instruments

As of December 31, 2021, ten interest rate derivative instruments and two cross currency rate swaps were outstanding and their fair value, in aggregate, amounted to a liability of $10.9 million. The change in the fair value of our interest rate derivative instruments and cross currency swaps 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. For the three-month period ended December 31, 2021, a gain of $5.2 million has been included in OCI and a loss 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 December 31, 2021.

Cash Flows

Three-month periods ended December 31, 2021 and 2020

Net Cash Provided by Operating Activities

Net cash flows provided by operating activities for the three-month period ended December 31, 2021, increased by $97.0 million to $165.4 million, from $68.4 million for the three-month period ended December 31, 2020. The increase is mainly attributable to increased cash from operations of $145.0 million, partly off-set by the unfavorable 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 $2.3 million, by the increased payments for interest (including swap payments) of $5.9 million during the three-month period ended December 31, 2021 compared to the three-month period ended December 31, 2020 and by the increased dry-docking and special survey costs of $0.1 million during the three-month period ended December 31, 2021 compared to the three-month period ended December 31, 2020.

Net Cash Used in Investing Activities

Net cash used in investing activities was $110.2 million in the three-month period ended December 31, 2021, which mainly consisted of (i) payments for the acquisition of six secondhand dry bulk vessels, (ii) settlement payments for the delivery of seven secondhand dry bulk vessels, (iii) settlement payment for one secondhand container vessel which was delivered in January 2022, (iv) advance payment for the acquisition of one secondhand dry bulk vessel, which was delivered in January 2022, and (v) payments for upgrades for certain of our container and dry bulk vessels; partly off-set by proceeds we received from (i) the sale of two container vessels and (ii) the sale of 1,221,800 ordinary shares of ZIM that we owned.

Net cash used in investing activities was $14.7 million in the three-month period ended December 31, 2020, which mainly consisted of payments for upgrades for certain of our container vessels and payments for the acquisition of one secondhand container vessel; partly off-set by proceeds we received from the sale of one container vessel and by return of capital we received from three entities jointly-owned with York pursuant to the Framework Deed.

Net Cash Used in Financing Activities

Net cash used in financing activities was nil in the three-month period ended December 31, 2021, which mainly consisted of (a) $20.0 million net proceeds relating to our debt financing agreements (including proceeds of $159.1 million we received from our debt financing agreements), (b) $10.8 million we paid for dividends to holders of our common stock for the third quarter of 2021 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 July 15, 2021 to October 14, 2021.

Net cash used in financing activities was $49.2 million in the three-month period ended December 31, 2020, which mainly consisted of (a) $32.0 million net payments relating to our debt financing agreements, (b) $9.3 million we paid for dividends to holders of our common stock for the third quarter of 2020 and (c) $0.9 million we paid for dividends to holders of our Series B Preferred Stock, $2.1 million we paid for dividends to holders of our Series C Preferred Stock, $2.2 million we paid for dividends to holders of our Series D Preferred Stock and $2.5 million we paid for dividends to holders of our Series E Preferred Stock for the period from July 15, 2020 to October 14, 2020.

Year ended December 31, 2021 compared to the year ended December 31, 2020

During the years ended December 31, 2021 and 2020, we had an average of 83.6 and 60.0 vessels, respectively, in our fleet.

In the year ended December 31, 2021, (i) we accepted delivery of the newbuild container vessels YM Target and YM Tiptop with an aggregate TEU capacity of 25,380, the secondhand container vessels Aries, Argus, Glen Canyon, Androusa, Norfolk, Porto Cheli, Porto Kagio, Porto Germeno, and Gialova with an aggregate TEU capacity of 49,909; and we sold the container vessels Halifax Express, Prosper, Venetiko, ZIM Shanghai and ZIM New York with an aggregate TEU capacity of 22,306 and (ii) we acquired (a) the 75% equity interest of York Capital Management in each of the 11,010 TEU container vessels Cape Kortia and Cape Sounio and (b) the 51% equity interest of York in each of the 11,010 TEU container vessels Cape Tainaro, Cape Artemisio and Cape Akritas and as a result we obtained 100% of the equity interest in each of these five vessels.

Furthermore, in the year ended December 31, 2021, we acquired all of the equity interest of sixteen companies (which owned or had committed to acquire dry bulk vessels) owned by entities affiliated with our Chairman and Chief Executive Officer, Konstantinos Konstantakopoulos. We agreed to acquire these companies from Mr. Konstantakopoulos at cost with no mark-up or premium payable to Mr. Konstantakopoulos or his affiliated entities. Mr. Konstantakopoulos did not receive a profit as a result of the acquisition. The sixteen dry bulk vessels (Pegasus, Builder, Adventure, Eracle, Peace, Sauvan, Pride, Alliance, Manzanillo, Acuity, Seabird, Aeolian, Comity, Athena, Farmer and Greneta) that were part of the acquisition had an aggregate DWT of 932,329 and were delivered to us during the year ended December 31, 2021. In addition, in the year ended December 31, 2021, we accepted delivery of another twenty-seven secondhand dry bulk vessels (Bernis, Verity, Dawn, Discovery, Clara, Serena, Merida, Progress, Miner, Parity, Uruguay, Resource, Konstantinos, Taibo, Thunder, Equity, Cetus (ex. Charm), Curacao, Rose, Bermondi, Titan I, Orion, Merchia, Damon, Pythias, Egyptian Mike and Phoenix) with an aggregate DWT of 1,388,422.

In the year ended December 31, 2020, we accepted delivery of the newbuild container vessels YM Triumph, YM Truth and YM Totality with an aggregate TEU capacity of 38,070 and the secondhand container vessels Virgo, Scorpius and Neokastro with an aggregate TEU capacity of 11,008; and we sold the container vessels Neapolis, Kawasaki, Kokura, Zagora and Singapore Express with an aggregate TEU capacity of 22,503.

In the year ended December 31, 2021 and 2020, our fleet ownership days totaled 30,525 and 21,965 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.

Consolidated Financial Results and vessels’ operational data ⁽¹⁾

Segmental Financial Summary ⁽¹⁾

⁽¹⁾ The results of dry bulk vessels are included from June 14, 2021. Prior to that, our results were attributable to container vessels only.
⁽²⁾ Voyage revenue adjusted on a cash basis is not a recognized measurement under U.S. generally accepted accounting principles (“GAAP”). Refer to “Consolidated Financial Results and vessels’ operational data” above for the reconciliation of Voyage revenue adjusted on a cash basis.

Voyage Revenue

Voyage revenue increased by 72.4%, or $333.3 million, to $793.6 million during the year ended December 31, 2021, from $460.3 million during the year ended December 31, 2020. The increase is mainly attributable to (i) revenue earned by six container vessels acquired during the year ended December 31, 2020 as well as by revenue earned by 16 container vessels and 41 dry bulk vessels acquired during the year ended December 31, 2021, and (ii) increased charter rates in certain of our container vessels during the year ended December 31, 2021 compared to the year ended December 31, 2020, partly off-set by revenue not earned by five container vessels sold during the year ended December 31, 2020 and five container vessels sold during the year ended December 31, 2021.

Voyage revenue adjusted on a cash basis (which eliminates non-cash “Accrued charter revenue”), increased by 62.3%, or $300.1 million, to $781.9 million during the year ended December 31, 2021, from $481.8 million during the year ended December 31, 2020. Accrued charter revenue for the years ended December 31, 2021 and 2020 was a negative amount of $11.3 million and a positive amount of $21.3 million, respectively.

Voyage Expenses

Voyage expenses were $13.3 million and $7.4 million for the years ended December 31, 2021 and 2020, 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 $11.1 million and $6.5 million for the years ended December 31, 2021 and 2020, respectively. Voyage expenses – related parties represent (i) fees of 1.25% in the aggregate on voyage revenues charged by a related manager and a service provider and (ii) charter brokerage fees (in respect of our container vessels) payable to two related charter brokerage companies for an amount of approximately $1.3 million and $0.8 million, in the aggregate, for the years ended December 31, 2021 and 2020, respectively.

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 $180.0 million and $117.1 million during the years ended December 31, 2021 and 2020, respectively. Daily vessels’ operating expenses were $5,896 and $5,329 for the years ended December 31, 2021 and 2020, respectively. The increase in the daily operating expenses during the year ended December 31, 2021 is mainly attributable to increased one-time predelivery expenses for the acquisition of dry bulk vessels and increased crew costs related to COVID-19 pandemic measures. 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 $9.4 million and $7.4 million during the years ended December 31, 2021 and 2020, respectively, and both include $2.5 million paid to a related manager.

Management Fees – related parties

Management fees paid to our related party managers were $29.6 million and $21.6 million during the years ended December 31, 2021 and 2020, respectively.

General and Administrative Expenses – non-cash component

General and administrative expenses – non-cash component for the year ended December 31, 2021 amounted to $7.4 million, representing the value of the shares issued to a related party manager on March 31, 2021, June 30, 2021, September 30, 2021 and December 30, 2021. General and administrative expenses – non-cash component for the year ended December 31, 2020 amounted to $3.7 million, representing the value of the shares issued to a related party manager on March 30, 2020, June 30, 2020, September 30, 2020 and December 30, 2020.

Amortization of Dry-Docking and Special Survey

Amortization of deferred dry-docking and special survey costs was $10.4 million and $9.0 million during the year ended December 31, 2021 and 2020, respectively. During the year ended December 31, 2021, 14 vessels underwent and completed their dry-docking and special survey and one vessel was in the process of completing her dry-docking and special survey. During the year ended December 31, 2020, 11 vessels underwent and completed their dry-docking and special survey.

Depreciation

Depreciation expense for the year ended December 31, 2021 and 2020 was $137.0 million and $108.7 million, respectively.

Gain / (loss) on Sale / Disposal of Vessels, net

During the year ended December 31, 2021, we recorded a net gain of $45.9 million from the sale of the container vessels Prosper (asset held for sale at March 31, 2021), Halifax Express (asset held for sale at December 31, 2020), Venetiko (asset held for sale at March 31, 2021 and June 30, 2021), ZIM Shanghai (asset held for sale as at June 30, 2021 and September 30, 2021) and ZIM New York (asset held for sale as at June 30, 2021 and September 30, 2021). During the year ended December 31, 2020, we recorded an aggregate net loss of $79.1 million from the sale of the container vessels Neapolis, Kawasaki, Kokura, Zagora and Singapore Express. Neapolis and Zagora were classified as assets held for sale at December 31, 2019.

Loss on Vessels Held for Sale

During the year ended December 31, 2021, the container vessels Messini, Sealand Illinois, Sealand Michigan and York were classified as vessels held for sale. No loss on vessels held for sale was recorded since each vessel’s estimated fair value less costs to sell exceeded each vessel’s carrying value. During the year ended December 31, 2020, the container vessel Halifax Express was classified as vessel held for sale and we recorded a loss on vessel held for sale of $7.7 million, which resulted from its estimated fair value measurement less costs to sell, during the year.

Vessels’ Impairment Loss

During the year ended December 31, 2021 no impairment loss was recorded. During the year ended December 31, 2020, we recorded an impairment loss in relation to five of our container vessels in the amount of $31.6 million, in the aggregate.

Interest Income

Interest income amounted to $1.6 million and $1.9 million for the years ended December 31, 2021 and 2020, respectively.

Interest and Finance Costs

Interest and finance costs were $86.1 million and $68.7 million during the years ended December 31, 2021 and 2020, respectively. The increase is mainly attributable to the increased average loan balances during the year ended December 31, 2021 compared to the year ended December 31, 2020, partly off-set by the decreased financing cost during the year ended December 31, 2021 compared to the year ended December 31, 2020.

Swaps’ Breakage Costs

During the year ended December 31, 2020, we terminated two interest rate derivative instruments that qualified for hedge accounting and we paid the counterparties breakage costs in the amount of $0.006 million in the aggregate.

Gain on Sale of Equity Securities / Dividend Income from Investment in Equity Securities

The gain on sale of equity securities of $60.2 million for the year period ended December 31, 2021, represents the difference between the aggregate sale price of 1,221,800 ordinary shares of ZIM as compared to the book value of these shares as of December 31, 2020. ZIM completed its initial public offering and listing on the New York Stock Exchange of its ordinary shares on January 27, 2021. Furthermore, in the year ended December 31, 2021, we received a dividend from ZIM in the amount of $1.8 million.

Income from Equity Method Investments

During the year ended December 31, 2021, we recorded an income from equity method investments of $12.8 million representing our share of the income in jointly owned companies pursuant to the Framework Deed, with York. Since late March 2021, we have held 100% of the equity interest in five previously jointly owned companies with York, and since then these five companies are consolidated in our consolidated financial statements. As of December 31, 2021, six companies are jointly owned with York (of which, four companies currently own container vessels). During the year ended December 31, 2020, we recorded an income from equity method investments of $16.2 million relating to investments under the Framework Deed. As of December 31, 2020, 13 companies were jointly owned with York (of which, ten companies owned container vessels). The decreased income from equity method investments in 2021 compared to 2020 is mainly attributable to the decreased number of container vessels jointly owned with York during 2021 compared to 2020; partly off-set by the increased profitability of certain jointly owned with York container vessels during 2021 compared to 2020 and to the gain on sale of one jointly owned with York container vessel which was sold in the third quarter of 2021.

Loss on Derivative Instruments

As of December 31, 2021, ten interest rate derivative instruments and two cross currency rate swaps were outstanding and their fair value, in aggregate, as at that date were a liability of $10.9 million. The change in the fair value of our interest rate derivative instruments and cross currency swaps that qualified for hedge accounting is recorded in OCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. For the year ended December 31, 2021, a gain of $5.7 million has been included in OCI and a loss of $0.4 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 year ended December 31, 2021.

Cash Flows

Years ended December 31, 2021 and 2020

Net Cash Provided by Operating Activities

Net cash flows provided by operating activities for the year ended December 31, 2021, increased by $192.2 million to $466.5 million, from $274.3 million for year ended December 31, 2020. The increase is mainly attributable to increased cash from operations of $300.2 million, partly off-set by the unfavorable 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 $1.3 million, by the increased payments for interest (including swap payments) of $11.8 million during the year ended December 31, 2021 compared to the year ended December 31, 2020 and by the increased dry-docking and special survey costs of $3.4 million during the year ended December 31, 2021 compared to the year ended December 31, 2020.

Net Cash Used in Investing Activities

Net cash used in investing activities was $787.5 million in the year ended December 31, 2021, which mainly consisted of (i) net payments for the acquisition of the 75% equity interest in two companies and of the 51% equity interest in three companies, previously jointly owned with York pursuant to the Framework Deed, (ii) payments for the delivery of two newbuild container vessels, (iii) settlement payments for the acquisition of three secondhand container vessels, (iv) payments for the acquisition of six secondhand container vessels and 41 dry bulk vessels, (v) payment for the acquisition of one secondhand container vessel which was delivered in January 2022, (vi) advance payments for the acquisition of one secondhand dry bulk vessel, which was delivered in January 2022 (vii) payments for the acquisition of the equity interest of sixteen companies (which owned or had committed to acquire dry bulk vessels) owned by our Chairman and Chief Executive Officer, Konstantinos Konstantakopoulos in accordance with the Share and Purchase agreement dated June 14, 2021 (agreed to acquire the equity interest of these companies at cost with no mark-up or premium payable to Mr. Konstantakopoulos or his affiliated entities) and (viii) payments for upgrades for certain of our container and dry bulk vessels; partly off-set by proceeds we received from (i) the sale of 1,221,800 ordinary shares of ZIM that we owned, (ii) the sale of five container vessels and (iii) return of capital we received from one entity jointly -owned with York pursuant to the Framework Deed.

Net cash used in investing activities was $36.4 million in the year ended December 31, 2020, which mainly consisted of payments for upgrades for certain of our container vessels and payments for the delivery of three newbuild container vessels and three secondhand container vessels; partly off-set by proceeds we received from the sale of five of our container vessels and by return of capital we received from ten entities jointly-owned with York pursuant to the Framework Deed.

Net Cash Provided by / (Used in) Financing Activities

Net cash provided by financing activities was $482.6 million in the year ended December 31, 2021, which mainly consisted of (a) $570.0 million net proceeds relating to our debt financing agreements (including proceeds we received (i) from the issuance of €100.0 million unsecured bond on the Athens Exchange and (ii) from our debt financing agreements of an amount of $1,103.1 million), (b) $40.2 million we paid for dividends to holders of our common stock for the fourth quarter of 2020, the first quarter of 2021, the second quarter of 2021 and the third quarter of 2021 and (c) $3.8 million we paid for dividends to holders of our Series B Preferred Stock, $8.5 million we paid for dividends to holders of our Series C Preferred Stock, $8.7 million we paid for dividends to holders of our Series D Preferred Stock and $10.2 million we paid for dividends to holders of our Series E Preferred Stock for the periods from October 15, 2020 to January 14, 2021, January 15, 2021 to April 14, 2021, April 15, 2021 to July 14, 2021 and July 15, 2021 to October 14, 2021.

Net cash used in financing activities was $241.9 million in the year ended December 31, 2020, which mainly consisted of (a) $165.1 million net payments relating to our debt financing agreements, (b) $34.3 million we paid for dividends to holders of our common stock for the fourth quarter of 2019, the first quarter of 2020, the second quarter of 2020 and the third quarter of 2020 and (c) $3.8 million we paid for dividends to holders of our Series B Preferred Stock, $8.5 million we paid for dividends to holders of our Series C Preferred Stock, $8.7 million we paid for dividends to holders of our 8.75% Series D Preferred Stock and $10.2 million we paid for dividends to holders of our Series E Preferred Stock for the period from October 15, 2019 to January 14, 2020, January 15, 2020 to April 14, 2020, April 15, 2020 to July 14, 2020 and July 15, 2020 to October 14, 2020.

Liquidity and Unencumbered Vessels

Cash and cash equivalents

As of December 31, 2021, we had Cash and cash equivalents of $353.5 million, consisting of cash, cash equivalents and restricted cash. Furthermore, as of December 31, 2021, we had liquidity of $359.0 million (including our share of cash amounting to $5.5 million held in companies co-owned with York), which coupled with the $193.3 million of undrawn funds from our two hunting license facilities (adjusted for the $56.7 million already drawn in 2022), amounts to $552.3 million.

Debt-free vessels

As of March 9, 2022, the following vessels were free of debt.

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