Capital Product Partners L.P. Announces Fourth Quarter 2016 Financial Results, an Increase to Its Common Distribution, Certain Amendments to One of Its Management Agreements and Fleet Employment Updates
The Partnership's net income for the quarter ended
Operating surplus (a non-GAAP financial measure) prior to Class
Total revenues for the fourth quarter of 2016 reached
Total expenses for the fourth quarter of 2016 were
Total other expense, net for the fourth quarter of 2016 was
As of
As of
Acquisition of M/T 'Amor'
In
Management Agreement Amendments
The Partnership has entered into an agreement with our Manager, Capital Ship Management ("CSM"), a subsidiary of our sponsor Capital Maritime, to amend certain terms under the Crude Carriers Management Agreement, which applies to three of our crude tanker vessels in our fleet, the M/T 'Aias', the M/T 'Miltiadis M II' and the M/T 'Amoureux', which were acquired as part of the merger with
Fleet Employment Update
In connection with the spin-off of International Seaways, Inc. ("INSW") (formerly known as
The M/T 'Aristotelis' (51,604 dwt IMO II/III Chemical Product Tanker built 2013,
The M/T 'Arionas' (36,725 dwt, Ice Class 1A IMO II/III Chemical/ Product Tanker, built 2006, Hyundai Mipo Dockyard,
As a result of the new charters listed above, our charter coverage for 2017 has increased to 82%.
Quarterly Common and Class B Unit Cash Distribution
On
In addition, on
Market Commentary
Product & Crude Tanker Markets
Product tanker spot rates remained depressed for most of the fourth quarter of 2016, but saw a gradual improvement towards the latter part of the three-month period. In the first month of the quarter, the market was under pressure as lack of arbitrage opportunities and high product inventories had a negative impact on medium-range tanker ("MR") chartering activity, offsetting firm
As a result of the weak spot market overall, the period market remained close to historically low levels with only a limited amount of period fixtures taking place in the fourth quarter of 2016.
On the supply side, there was minimal activity in terms of new orders for product tankers and the MR orderbook currently stands at 9.0%, its lowest level since 2000. In addition, the product tanker deliveries continued to experience slippage during 2016, as approximately 27% of the expected MR and handy size tanker newbuildings were not delivered on schedule. Analysts estimate that net fleet growth for product tankers will amount to 3.6% in 2017, well below the 2016 growth rate of 6.1%. On the demand side, analysts expect growth of 2.0%, largely supported by continued growth in
Suezmax spot earnings improved considerably in the fourth quarter of 2016, compared to the previous quarter. Demand for Suezmaxes was seasonally strong, while overall volumes were boosted by a sharp rise in crude oil cargoes in the Middle Eastern Gulf and
The firm spot market had some positive impact on period activity, although the number of fixtures reported during the quarter remained limited.
On the supply side, the Suezmax orderbook represented, at the end of 2016, approximately 17.7% of the current fleet. Contracting activity has been subdued, with 14 Suezmax tankers ordered in 2016, while analysts estimate that slippage for the twelve-month period amounted to 31% of the expected deliveries for 2016. In terms of demand, Chinese and Indian seaborne crude imports are projected to rise firmly in 2017, by 8% and 5% respectively, potentially partly counterbalancing the negative impact from the announced oil production reduction by
Neo-Panamax Container Market
The container charter market in the fourth quarter of 2016 remained largely unchanged compared to the previous quarter, with container vessels of all types being chartered at or close to historically low levels.
The container sector consolidation continued with
The idle container fleet saw a marginal increase from 6.7% in the previous quarter to 7% at the end of the fourth quarter of 2016.
Analysts have revised their demand growth estimate for containerized cargo for full-year 2016 down to 3.2% from 3.4% in the previous quarter, with net fleet growth for 2016 also being revised downwards to 1.1% from 2.2% in the previous quarter. The substantial reduction in the net fleet growth estimate was mainly due to a surge in demolition towards the end of 2016. The total container vessel demolition for the year amounted to a record 660,000 TEU compared to 193,156 TEU for 2015. The average age of scrapped tonnage fell to 18.6 years from 23 years in 2015.
As at the end of the fourth quarter of 2016, the container order book stood at 15.9% of the current fleet, down from 16.4% in the previous quarter, which is the lowest since 1999, while slippage for container vessels of all sizes amounted to 36% for the full year. Going into 2017 analysts forecast demand growth of 4.0% to marginally outpace net fleet growth of 3.7%.
The increased consolidation currently under process in the liner business, as well as the rationalization of the supply of vessels through increased vessel demolition, cancellation of newbuilding orders and slippage as well as lack of new ordering, is expected to set the ground for a supply led recovery for container charter rates in the medium to long run.
Management Commentary
Mr.
"The start of 2016 was marked by the severe equity and debt market pricing dislocation that affected the majority of publicly traded master limited partnerships, including us and which adversely impacted our cost of capital. As a result, in
"Since then, we have taken steps to address a number of the issues that caused the underperformance of our units. First, we successfully renegotiated our charters with HMM, one of our largest counterparties, which went through a major financial restructuring. This resulted in a 20% reduction of the charter rates of our vessels employed with HMM effective until the end of 2019. However, the financial impact of this reduction was largely offset by promptly liquidating the equity compensation we successfully negotiated and received from HMM in return for this charter rate reduction, as we recovered approximately 80% of our total charter hire loss. Second, we expanded our fleet by acquiring in the fourth quarter 2016 a modern, eco MR product tanker from Capital Maritime with an attractive charter to Cargill. We have funded part of the acquisition cost with the proceeds from the
sale of the HMM equity compensation. Third, we continue to have access to a number of dropdown opportunities from our sponsor including five eco MR product tankers, for which we have a right of first refusal, as well as other assets including two crude Aframax tankers with five year charters. Fourth, we launched an ATM offering for up to
"As announced in October, we are pleased that with the acquisition of the MT 'Amor', our Board of Directors has approved the increase of our quarterly distribution to
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, market and charter rate expectations, charterers' performances, our expectations or objectives regarding future distribution amounts, our ability to repay and/or refinance our debt, 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 |
For the years ended |
|||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||
Revenues | $ | 52,456 | $ | 44,816 | $ | 205,594 | $ | 156,613 | ||||||
Revenues - related party | 9,945 | 14,541 | 36,026 | 63,731 | ||||||||||
Total Revenues | 62,401 | 59,357 | 241,620 | 220,344 | ||||||||||
Expenses: | ||||||||||||||
Voyage expenses | 2,582 | 2,246 | 9,920 | 6,479 | ||||||||||
Voyage expenses - related party | 92 | 104 | 360 | 411 | ||||||||||
Vessel operating expenses | 17,542 | 15,745 | 66,637 | 58,625 | ||||||||||
Vessel operating expenses - related party | 2,832 | 2,533 | 10,866 | 11,708 | ||||||||||
General and administrative expenses | 1,750 | 1,268 | 6,253 | 6,608 | ||||||||||
Vessel depreciation and amortization | 18,418 | 17,045 | 71,897 | 62,707 | ||||||||||
Operating income | 19,185 | 20,416 | 75,687 | 73,806 | ||||||||||
Other income / (expense), net: | ||||||||||||||
Interest expense and finance cost | (6,223 | ) | (5,456 | ) | (24,302 | ) | (20,143 | ) | ||||||
Other income | 782 | 396 | 1,104 | 1,747 | ||||||||||
Total other expense, net | (5,441 | ) | (5,060 | ) | (23,198 | ) | (18,396 | ) | ||||||
Partnership's net income | $ | 13,744 | $ | 15,356 | $ | 52,489 | $ | 55,410 | ||||||
Preferred unit holders' interest in Partnership's net income | $ | 2,775 | $ | 2,853 | $ | 11,101 | $ | 11,334 | ||||||
$ | 215 | $ | 250 | $ | 818 | $ | 879 | |||||||
Common unit holders' interest in Partnership's net income | $ | 10,754 | $ | 12,253 | $ | 40,570 | $ | 43,197 | ||||||
Net income per: | ||||||||||||||
Common unit, basic and diluted | $ | 0.09 | $ | 0.10 | $ | 0.34 | $ | 0.38 | ||||||
Weighted-average units outstanding: | ||||||||||||||
Common units, basic and diluted | 120,477,800 | 119,559,456 | 119,803,329 | 115,030,879 | ||||||||||
$ | 13,744 | $ | 15,356 | $ | 52,489 | $ | 55,410 |
Unaudited Condensed Consolidated Balance Sheets
(In thousands of United States Dollars)
Assets | ||||||
Current assets | As of 2016 |
As of |
||||
Cash and cash equivalents | $ | 106,678 | $ | 90,190 | ||
Trade accounts receivable, net | 2,497 | 2,680 | ||||
Prepayments and other assets | 3,943 | 2,547 | ||||
Inventories | 4,761 | 4,407 | ||||
Total current assets | 117,879 | 99,824 | ||||
Fixed assets | ||||||
Advances for vessels under construction - related party | - | 18,172 | ||||
Vessels, net | 1,367,731 | 1,315,485 | ||||
Total fixed assets | 1,367,731 | 1,333,657 | ||||
Other non-current assets | ||||||
Above market acquired charters | 90,243 | 100,518 | ||||
Deferred charges, net | 4,154 | 3,482 | ||||
Restricted cash | 18,000 | 17,000 | ||||
Prepayments and other assets | 598 | 1,394 | ||||
Total non-current assets | 1,480,726 | 1,456,051 | ||||
Total assets | $ | 1,598,605 | $ | 1,555,875 | ||
Liabilities and Partners' Capital | ||||||
Current liabilities | ||||||
Current portion of long-term debt, net | $ | 39,568 | $ | 11,922 | ||
Trade accounts payable | 8,686 | 8,431 | ||||
Due to related parties | 16,095 | 22,154 | ||||
Accrued liabilities | 7,861 | 7,872 | ||||
Deferred revenue, current | 19,986 | 10,867 | ||||
Total current liabilities | 92,196 | 61,246 | ||||
Long-term liabilities | ||||||
Long-term debt, net | 562,619 | 555,888 | ||||
Deferred revenue | 16,033 | 921 | ||||
Total long-term liabilities | 578,652 | 556,809 | ||||
Total liabilities | 670,848 | 618,055 | ||||
Commitments and contingencies | ||||||
Partners' capital | 927,757 | 937,820 | ||||
Total liabilities and partners' capital | $ | 1,598,605 | $ | 1,555,875 | ||
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands of United States Dollars)
For the years ended |
||||||||
2016 | 2015 | |||||||
Cash flows from operating activities: | ||||||||
Net income | 52,489 | 55,410 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Vessel depreciation and amortization | 71,897 | 62,707 | ||||||
Amortization and write off of deferred financing costs | 1,250 | 908 | ||||||
Amortization of above market acquired charters | 14,542 | 14,864 | ||||||
Equity compensation expense | 1,074 | 34 | ||||||
Changes in operating assets and liabilities: | ||||||||
Trade accounts receivable | 183 | (92 | ) | |||||
Due from related parties | -- | 55 | ||||||
Prepayments and other assets | (600 | ) | (2,102 | ) | ||||
Inventories | (354 | ) | (973 | ) | ||||
Trade accounts payable | (595 | ) | 1,929 | |||||
Due to related parties | (6,059 | ) | 4,657 | |||||
Accrued liabilities | 662 | 1,114 | ||||||
Deferred revenue | 24,267 | (2,207 | ) | |||||
Dry docking costs paid | (3,670 | ) | (2,095 | ) | ||||
Net cash provided by operating activities | 155,086 | 134,209 | ||||||
Cash flows from investing activities: | ||||||||
Vessel acquisitions and improvements including time charter agreements | (90,782 | ) | (207,937 | ) | ||||
Increase in restricted cash | (1,000 | ) | (2,000 | ) | ||||
Net cash used in investing activities | (91,782 | ) | (209,937 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of Partnership units | 4,546 | 133,327 | ||||||
Expenses paid for issuance of Partnership units | (784 | ) | (739 | ) | ||||
Proceeds from issuance of long-term debt | 35,000 | 115,000 | ||||||
Payments of long-term debt | (17,354 | ) | (121,299 | ) | ||||
Deferred financing costs paid | (31 | ) | (1,797 | ) | ||||
Dividends paid | (68,193 | ) | (122,773 | ) | ||||
Net cash (used in) / provided by financing activities | (46,816 | ) | 1,719 | |||||
Net increase / (decrease) in cash and cash equivalents | 16,488 | (74,009 | ) | |||||
Cash and cash equivalents at the beginning of the year | 90,190 | 164,199 | ||||||
Cash and cash equivalents at the end of the year | 106,678 | 90,190 | ||||||
Supplemental cash flow information | ||||||||
Cash paid for interest | $ | 23,763 | $ | 16,759 | ||||
Non-Cash Investing and Financing Activities | ||||||||
Capital expenditures included in liabilities | $ | 1,383 | $ | 769 | ||||
Offering expenses included in liabilities | $ | 106 | $ | -- | ||||
Capitalized dry docking costs included in liabilities | $ | 1,141 | $ | 1,687 | ||||
Assumption of loan regarding the acquisition of the shares of |
$ | 15,750 |
$ | -- | ||||
Units issued to acquire |
$ | 911 | $ | -- | ||||
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, amortization of above market acquired charters, straight line revenue adjustments and the proceeds from the sale of HMM shares.
Operating Surplus is a quantitative measure used in the publicly traded partnership investment community to assist in evaluating a partnership's financial performance and ability to make quarterly cash distributions. Operating Surplus is not 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 |
|||
Partnership's net income | 13,744 | 15,356 | 11,770 | |||
Adjustments to reconcile net income to operating surplus prior to Capital Reserve and Class B Preferred Units distribution | ||||||
Depreciation and amortization1 | 18,928 | 17,376 | 18,604 | |||
Amortization of above market acquired charters and straight line revenue adjustments | 1,355 | 2,429 | 1,332 | |||
Proceeds from the sale of HMM shares | -- | -- | 29,706 | |||
Operating Surplus prior to capital reserve and Class B Preferred Units distribution | 34,027 | 35,161 | 61,412 | |||
Capital reserve | (14,644) | -- | (14,644) | |||
Class B preferred units distribution | (2,775) | (2,853) | (2,776) | |||
Operating Surplus after capital reserve and Class B Preferred Units distribution | 16,608 | 32,308 | 43,992 | |||
Increase in recommended reserves | (6,625) | (3,008) | (34,705) | |||
Available Cash | 9,983 | 29,300 | 9,287 |
1 Depreciation and amortization line item includes the following components:
- Vessel depreciation and amortization; and
- Deferred financing costs and equity compensation plan amortization.
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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