Capital Product Partners L.P. Announces First Quarter 2016 Financial Results, Quarterly Distributions on Common and Class B Units and New Common Unit Distribution Guidance of $0.30 per Year
Management Commentary
"The board of directors (the "Board") today announced the creation of a capital reserve, a related reduction in available cash distributable on common units and the resetting of the common unit distribution level to a new sustainable path. Accordingly, our Board has fixed our common unit distribution for the first quarter of 2016 at
"Over the last few quarters, the Partnership has experienced a significant deterioration in the trading price of its common units and, as a result, a sharp increase in its cost of capital. This deterioration has occurred against the backdrop of a severe equity and debt market pricing dislocation for a number of publicly traded master limited partnerships. In practice, this means that our ability to access capital markets is currently severely restricted. In addition, following a prolonged downturn in the container and dry cargo shipping markets,
"In the context of high capital costs and a potential decrease in revenues, one of our credit facilities has started amortizing in the first quarter of 2016, while our three other credit facilities will start amortizing in the fourth quarter of 2017. As a result, we are due to repay approximately
"In the past, we successfully managed to extend the non-amortizing periods and maturities of our credit facilities, which is not practicable today in a cost effective manner. In light of these circumstances, the Board of the Partnership has decided to reserve approximately
"We expect that these actions and our new annual distribution level will allow us to maintain a strong balance sheet. We also expect the new distribution level to be sustainable, even if the attempted restructuring of HMM is unsuccessful and we are forced to re-deploy the five vessels under charter with HMM in the currently weak container market.
"Based on our contracted cash flow in the coming years, we expect the new distribution level to provide a healthy common unit distribution coverage ratio after giving effect to the new reserves, even allowing for the adverse events mentioned above.
"We intend to revisit our annual distribution guidance from time to time, including if the Partnership's access to the capital markets improves, if we are successful in refinancing our debt obligations in the coming years under favorable terms or if we are able to pursue accretive transactions by expanding our asset base and increasing the long term distributable cash flow of the Partnership."
First Quarter 2016 Financial Results
The Partnership's net income for the quarter ended
Operating surplus, prior to Class
Total revenues for the first quarter of 2016 reached
Total expenses for the first quarter of 2016 were
Total other expense, net for the first quarter of 2016 amounted to
As of
As of
Fleet Developments
On
On
Following the delivery of the M/V 'CMA CGM Magdalena', the Partnership's charter coverage for 2016 and 2017 stands at 92% and 73%, respectively.
Market Commentary
Product & Crude Tanker Markets
The product tanker market experienced weaker spot charter rates in the first quarter of 2016 compared to the previous quarter. The relatively warm weather for this time of the year, along with high product inventories has had a negative impact on product tanker demand in the first three months of 2016. In addition, the spring refinery maintenance peak has shifted to February-March from the more usual April-May period, which resulted in lower chartering volumes and exerted downward pressure on product tanker spot earnings. As a result, the transatlantic trade saw weaker spot rates towards the end of the quarter, while rates from the
In the time charter market,
On the supply side, there was minimal activity in terms of new orders for product tankers. Analysts expect that net fleet growth for product tankers for 2016 will be in the region of 5.1%, while overall demand for product tankers for the year is estimated to grow at 3.7%, as the refinery capacity expansion, predominantly in the Eastern hemisphere, continues to generate increased ton mile demand.
The Suezmax crude tanker market remained strong in the first quarter of 2016. However, rates retreated from the seasonably high rates experienced during the previous quarter. The market was driven lower by softer demand resulting from refinery maintenance and relatively warmer weather conditions. On the other hand, Chinese demand for crude imports was solid, with imports rising to new record levels, partially offsetting weaker demand in other regions.
Period rates for Suezmaxes decreased compared to the previous quarter primarily due to the lower rates experienced in the spot market.
On the supply side, the Suezmax orderbook represented, at the end of the first quarter of 2016, approximately 23.0% of the current fleet. However, contracting activity decreased year to date with only four new vessel orders being placed. Suezmax tanker demand is projected to continue growing in 2016 on the back of further growth in crude shipments from the
Post-panamax Container Market
After experiencing very low charter activity towards the end of the previous year, post-panamax container vessels saw increased fixing activity from the first quarter of 2016 onwards. However, the buildup of idle container vessels from the previous quarter and particularly in the post-panamax segment meant that owners did not manage to profit from the increased activity, as charter rates remained at historically low levels.
Analysts' expectations for demand growth in 2016 have been revised to 4.1%, while the supply of vessels is expected to increase by 3.9%.
The orderbook compared to the current container fleet stands at 18%, which is the lowest since 2003. At the same time, the container market is experiencing high demolition activity with 105,510 TEU removed from the fleet in the first quarter of 2016 with an average age of 19.7 years. In addition, the ordering of container vessels has almost come to a complete standstill for larger container vessels, while newbuilding slippage is rising.
Quarterly Common and Class B Unit Cash Distribution
On
In addition, on
Conference Call and Webcast
Today,
Conference Call Details:
Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1 866 819 7111 (
A replay of the conference call will be available until
Slides and Audio Webcast
There will also be a simultaneous live webcast over the
About
For more information about the Partnership, please visit our website: www.capitalpplp.com.
Forward-Looking Statements
The statements in this press release that are not historical facts, including, among other things, cash generation, our ability to repay external debt, future earnings, our expectations regarding employment of our vessels, redelivery dates and charter rates, fleet growth, as well as market and charter rate expectations, charterers' performance, and our expectations or objectives regarding future distribution amounts, our ability to pursue growth opportunities and grow our distributions and annual distribution guidance, are forward-looking statements (as such term is defined in Section 21E of the Securities Exchange Act of 1934, as amended). These forward-looking statements involve risks and uncertainties that could cause the stated or forecasted results to be materially different from those anticipated. Unless required by law, we expressly disclaim any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in our views or expectations, to conform them to actual results or otherwise. We assume no responsibility for the accuracy and completeness of the forward-looking statements. We make no prediction or statement about the performance of our units.
CPLP-F
| Unaudited Condensed Consolidated Statements of Comprehensive Income | |||||
| (In thousands of United States Dollars, except for number of units and earnings per unit) | |||||
| For the three month periods ended |
|||||
| 2016 | 2015 | ||||
| Revenues | 47,329 | 30,130 | |||
| Revenues - related party | 10,718 | 18,755 | |||
| Total Revenues | 58,047 | 48,885 | |||
| Expenses: | |||||
| Voyage expenses | 1,852 | 1,044 | |||
| Voyage expenses - related party | 101 | 89 | |||
| Vessel operating expenses | 16,719 | 12,812 | |||
| Vessel operating expenses - related party | 2,616 | 2,955 | |||
| General and administrative expenses | 1,265 | 1,837 | |||
| Vessel depreciation and amortization | 17,453 | 14,374 | |||
| Operating income | 18,041 | 15,774 | |||
| Other income / (expense), net: | |||||
| Interest expense and finance cost | (6,097 | ) | (4,696 | ) | |
| Interest and other income | 158 | 1,073 | |||
| Total other expense, net | (5,939 | ) | (3,623 | ) | |
| Net income | 12,102 | 12,151 | |||
| Preferred unit holders' interest in Partnership's net income | 2,775 | 2,810 | |||
| 185 | 185 | ||||
| Common unit holders' interest in Partnership's net income | 9,142 | 9,156 | |||
| Net income per: | |||||
| -- Common unit basic and diluted | 0.08 | 0.09 | |||
| Weighted-average units outstanding: | |||||
| -- Common units basic and diluted | 119,559,456 | 104,308,293 | |||
| Comprehensive income: | |||||
| Partnership's net income | 12,102 | 12,151 | |||
| Comprehensive and other comprehensive income: | 12,102 | 12,151 | |||
| Unaudited Condensed Consolidated Balance Sheets | ||||
| (In thousands of United States Dollars, except for number of units and earnings per unit) | ||||
| Assets | ||||
| Current assets | As of 2016 |
As of 2015 |
||
| Cash and cash equivalents | 40,271 | 90,190 | ||
| Trade accounts receivable, net | 3,401 | 2,680 | ||
| Prepayments and other assets | 2,766 | 2,547 | ||
| Inventories | 4,655 | 4,407 | ||
| Total current assets | 51,093 | 99,824 | ||
| Fixed assets | ||||
| Advances for vessels under construction - related party | - | 18,172 | ||
| Vessels, net | 1,387,213 | 1,315,485 | ||
| Total fixed assets | 1,387,213 | 1,333,657 | ||
| Other non-current assets | ||||
| Above market acquired charters | 100,249 | 100,518 | ||
| Deferred charges, net | 3,461 | 3,482 | ||
| Restricted cash | 17,500 | 17,000 | ||
| Prepayments and other assets | 2,058 | 1,394 | ||
| Total non-current assets | 1,510,481 | 1,456,051 | ||
| Total assets | 1,561,574 | 1,555,875 | ||
| Liabilities and Partners' Capital | ||||
| Current liabilities | ||||
| Current portion of long-term debt, net | 15,910 | 11,922 | ||
| Trade accounts payable | 9,607 | 8,431 | ||
| Due to related parties | 19,310 | 22,154 | ||
| Accrued liabilities | 6,452 | 7,872 | ||
| Deferred revenue | 8,631 | 10,867 | ||
| Total current liabilities | 59,910 | 61,246 | ||
| Long-term liabilities | ||||
| Long-term debt, net | 582,932 | 555,888 | ||
| Deferred revenue | 696 | 921 | ||
| Total long-term liabilities | 583,628 | 556,809 | ||
| Total liabilities | 643,538 | 618,055 | ||
| Commitments and contingencies | ||||
| Partners' capital | 918,036 | 937,820 | ||
| Total liabilities and partners' capital | 1,561,574 | 1,555,875 | ||
| Unaudited Condensed Consolidated Statements of Cash Flows | ||||
| (In thousands of United States Dollars) | ||||
| For the three month periods ended |
||||
| 2016 | 2015 | |||
| Cash flows from operating activities: | ||||
| Net income | 12,102 | 12,151 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Vessel depreciation and amortization | 17,453 | 14,374 | ||
| Amortization of deferred charges | 544 | 155 | ||
| Amortization of above market acquired charters | 3,475 | 3,794 | ||
| Equity compensation expense | 267 | - | ||
| Changes in operating assets and liabilities: | ||||
| Trade accounts receivable | (721 | ) | 811 | |
| Prepayments and other assets | (883 | ) | (160 | ) |
| Inventories | (248 | ) | (409 | ) |
| Trade accounts payable | 382 | 1,820 | ||
| Due from related parties | - | (432 | ) | |
| Due to related parties | (2,844 | ) | (4,822 | ) |
| Accrued liabilities | (1,466 | ) | (91 | ) |
| Deferred revenue | (2,461 | ) | (2,284 | ) |
| Net cash provided by operating activities | 25,600 | 24,907 | ||
| Cash flows from investing activities: | ||||
| Vessel acquisitions and improvements | (73,578 | ) | (30,245 | ) |
| Increase in restricted cash | (500 | ) | (500 | ) |
| Net cash used in investing activities | (74,078 | ) | (30,745 | ) |
| Cash flows from financing activities: | ||||
| Proceeds from issuance of long-term debt | 35,000 | 16,750 | ||
| Deferred charges paid | (69 | ) | - | |
| Payments of long-term debt | (4,219 | ) | (1,350 | ) |
| Dividends paid | (32,153 | ) | (27,733 | ) |
| Net cash used in financing activities | (1,441 | ) | (12,333 | ) |
| Net decrease in cash and cash equivalents | (49,919 | ) | (18,171 | ) |
| Cash and cash equivalents at beginning of period | 90,190 | 164,199 | ||
| Cash and cash equivalents at end of period | 40,271 | 146,028 | ||
| Supplemental cash flow information | ||||
| Cash paid for interest | 6,562 | 4,074 | ||
| Non-Cash Investing Activities | ||||
| Capital expenditures included in liabilities | 169 | - | ||
| Deferred charges included in liabilities | 2,358 | 956 | ||
Appendix A - Reconciliation of Non-GAAP Financial Measure (In thousands of
Description of Non-GAAP Financial Measure - Operating Surplus
Operating Surplus represents net income adjusted for non-cash items such as depreciation and amortization expense and deferred revenue. Operating Surplus is a quantitative standard used in the publicly-traded partnership investment community to assist in evaluating a partnership's ability to make quarterly cash distributions. Operating Surplus is a non-GAAP financial measure and should not be considered as an alternative to net income or any other indicator of the Partnership's performance required by accounting principles generally accepted in
| Reconciliation of Non-GAAP Financial Measure - Operating Surplus |
For the three month period ended |
For the three month period ended |
For the three month period ended |
|||
| Net income | ||||||
| Adjustments to reconcile net income to operating surplus prior to class B preferred units distribution | ||||||
| Depreciation and amortization | 18,265 | 14,586 | 17,376 | |||
| Deferred revenue | 2,404 | 3,126 | 2,429 | |||
| OPERATING SURPLUS PRIOR TO CAPITAL RESERVE AND CLASS B PREFERRED UNITS DISTRIBUTION | 32,771 | 29,863 | 35,161 | |||
| Capital reserve | (14,644) | - | - | |||
| OPERATING SURPLUS PRIOR TO CLASS B PREFERRED UNITS DISTRIBUTION | 18,127 | 29,863 | 35,161 | |||
| Class B preferred units distribution | (2,775) | (2,801)1 | (2,853) | |||
| ADJUSTED OPERATING SURPLUS | 15,352 | 27,062 | 32,308 | |||
| Increase/(decrease) in other cash reserves | 6,138 | 1,547 | (3,008) | |||
| AVAILABLE CASH | ||||||
1 Includes distributions to the Partnership's unit holders as of
Contact Details:
CEO and CFO
Tel. +30 (210) 4584 950
E-mail: j.kalogiratos@capitalpplp.com
Investor Relations / Media
Capital
Tel. +1-212-661-7566
E-mail: cplp@capitallink.com
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