Capital Product Partners L.P. Announces Fourth Quarter 2017 Financial Results, the Completed Acquisition of the M/T ‘Aristaios', As Well As the Sale of the M/T ‘Aristotelis' and the Acquisition of the M/T ‘Anikitos'
The Partnership's net income for the quarter ended
Operating surplus prior to allocations to our capital reserve and distributions to the Class
Total revenues for the fourth quarter of 2017 reached
Voyage expenses for the fourth quarter of 2017 were
Total expenses for the fourth quarter of 2017 were
Total other expense, net for the fourth quarter of 2017 was
As of
Total cash as of
As of
Completed Acquisition of the M/T ‘Aristaios'
On
The acquisition of the M/T ‘Aristaios' was entered into on an arm's length basis and was reviewed and unanimously approved by the conflicts committee of our Board of Directors and our entire Board of Directors.
Sale of the M/T ‘Aristotelis' and Acquisition of the M/T ‘Anikitos'
On
In addition, the Partnership has agreed to acquire, conditional upon the successful completion of the sale of the M/T ‘Aristotelis', the M/T ‘Anikitos' an
eco-type MR product tanker (50,082 dwt IMO II/III Chemical Product Tanker built 2016,
The Partnership intents to fund the acquisition of the M/T ‘Anikitos' with the net proceeds to be received from the sale of the M/T ‘Aristotelis', available cash and the assumption of a term loan under a credit facility previously arranged by Capital
Maritime with ING Bank NV at an amount representing approximately 50% of the vessel's charter free market value at the time of the dropdown. The term loan is non-amortizing for a period of two years from the anniversary of the dropdown with an expected final maturity date in
The agreement to acquire the M/T ‘Anikitos' was entered into on an arm's length basis and was reviewed and unanimously approved by the conflicts committee of our Board of Directors and our entire Board of Directors.
Fleet Employment Update
The M/T ‘Aktoras' (36,759 dwt, IMO II/III Chemical Product Tanker built 2006 Hyundai Mipo Dockyard,
The M/T ‘Atlantas II' (36,759 dwt, IMO II/III Chemical Product Tanker built 2006 Hyundai Mipo Dockyard,
Finally,
All charter transactions with Capital Maritime listed above were unanimously approved by the
Following the new employment updates listed above, the acquisition of the M/T ‘Aristaios', the sale of the M/T ‘Aristotelis' and the acquisition of the M/T ‘Anikitos' (assuming for this purpose that both the sale of the M/T ‘Aristotelis' and the acquisition of the M/T ‘Anikitos' have been completed), the Partnership's charter coverage for 2018 is 66%.
Quarterly Common and Class B Unit Cash Distribution
On
In addition, on
Market Commentary
Product Tanker Market
The product tanker spot market saw continued improvement in the fourth quarter of 2017, albeit at a modest pace. Most gains were registered east of
In the period market, rates and activity increased, reflecting the improvement in the spot market. As a result of the improving spot market and the strong product tanker market fundamentals, one year period rates for MR product tankers have increased by approximately 10% year-on-year.
On the
supply side, despite somewhat increased activity in terms of new orders for product tankers in 2017, the orderbook remains close to historically low levels. At the end of the fourth quarter of 2017, the MR product tanker orderbook stood at approximately 8.0% of the current fleet, close to record low levels. In addition, product tanker deliveries continued to experience significant slippage during 2017, as 36.7% of the expected MR and handy size tanker newbuildings were not delivered on schedule. Looking ahead, analysts estimate that net fleet growth for product tankers will slow to 1.6% in 2018, while on the demand side analysts expect growth of 3.8%. Growing intra-Asian products trade and
Suezmax Tanker Market
The Suezmax spot market experienced relatively higher rates during the fourth quarter of 2017 compared to the previous quarter. The increase was primarily driven by seasonally higher demand and strong Chinese crude imports. The market was also supported by rising long-haul crude trade between the
The time charter market for Suezmaxes continued to remain illiquid and accordingly period rates remained at low levels, mirroring the lack of a material improvement in the spot market.
On the supply side, the Suezmax orderbook represented, at the end of the fourth quarter of 2017 approximately 11.5% of the current fleet. The delivery of new vessels is expected to slow down over the coming years, as 39 and 15 vessels are expected to be delivered in 2018 and 2019 respectively, assuming no cancellations or slippage. Analysts estimate that slippage for the full year of 2017 amounted to 21.9% of expected deliveries. In 2018, Suezmax dwt demand is
projected to grow by a robust 4.7%. While the decision in late
Finally, it is worth highlighting that overall tanker demolition activity increased to 11.1 million dwt in 2017, which compares favorably with the 2.5 million dwt demolished in 2016.
Neo-Panamax Container Market
Chartering activity for container vessels remained relatively healthy in the fourth quarter of 2017, despite this traditionally being a seasonally weaker period. Notably, the idle container fleet stood at the end of 2017 at approximately 2% of the current fleet, when compared to 7% at the end of 2016.
At the end of 2017, the container orderbook remained close to historically low levels, standing at 13.4% of the current fleet, down from 13.7% in the previous quarter. Slippage for 2017 is estimated at 38.6%, while container vessel demolition for full year 2017 is estimated at 397,903 TEUs.
Overall, analysts expect container vessel demand to grow by 5% in 2018, while the container fleet is expected to expand by 4%.
Management Commentary
Mr.
"We are pleased to have completed the acquisition of the M/T ‘Aristaios', soon after refinancing the majority of our indebtedness in the fourth quarter of 2017. The acquisition of the M/T ‘Aristaios' provides good cash flow visibility to our unitholders underpinned by another four years of remaining employment to a solid counterparty."
"Moreover, towards the end of the fourth quarter, we took advantage of an opportunity in the second-hand market to sell the M/T ‘Aristotelis' to an unaffiliated third party at an attractive price and committed to replace her with a younger, second generation eco MR product tanker, the M/T ‘Anikitos' with long term employment in place. The net cash outflow for the intended replacement is currently estimated to be less than
"We are also pleased to see the Partnership continue to deliver strong common unit distribution coverage after accounting for our debt amortization and the Class
"In these circumstances and subject to market conditions and availability of financing, we continue to aim to take advantage of a range of acquisition opportunities, whether from Capital Maritime or in the second-hand market, with the objective of further increasing the long-term distributable cash flow of the Partnership."
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 Internet, through 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, our ability to obtain financing and pursue growth opportunities, our expectations or objectives regarding future distribution amounts, our capital reserve, future earnings, our expectations regarding employment of our vessels, redelivery dates and charter rates, fleet growth, market and charter rate expectations, 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
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
Source:
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 year ended | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
Revenues | ||||||||||||
Revenues - related party | 11,347 | 9,945 | 44,653 | 36,026 | ||||||||
Total Revenues | 64,105 | 62,401 | 249,115 | 241,620 | ||||||||
Expenses: | ||||||||||||
Voyage expenses | 5,080 | 2,582 | 15,165 | 9,920 | ||||||||
Voyage expenses - related party | - | 92 | - | 360 | ||||||||
Vessel operating expenses | 20,059 | 17,542 | 74,516 | 66,637 | ||||||||
Vessel operating expenses - related party | 2,974 | 2,832 | 11,629 | 10,866 | ||||||||
General and administrative expenses | 1,672 | 1,750 | 6,234 | 6,253 | ||||||||
Vessel depreciation and amortization | 18,379 | 18,418 | 73,993 | 71,897 | ||||||||
Impairment of vessel | 3,282 | - | 3,282 | - | ||||||||
Operating income | 12,659 | 19,185 | 64,296 | 75,687 | ||||||||
Other income / (expense), net: | ||||||||||||
Interest expense and finance cost | (6,061) | (6,223) | (26,605) | (24,302) | ||||||||
Other income | 162 | 782 | 792 | 1,104 | ||||||||
Total other expense, net | (5,899) | (5,441) | (25,813) | (23,198) | ||||||||
Partnership's net income | $6,760 | $13,744 | $38,483 | $52,489 | ||||||||
Preferred unit holders' interest in Partnership's net income | ||||||||||||
General Partner's interest in Partnership's net income | $215 | $818 | ||||||||||
Common unit holders' interest in Partnership's net income | ||||||||||||
Net income per: | ||||||||||||
| ||||||||||||
Weighted-average units outstanding: | ||||||||||||
| 126,528,715 | 120,477,800 | 123,845,345 | 119,803,329 | ||||||||
Total Partnership's comprehensive income: | $6,760 | $13,744 | $38,483 | $52,489 | ||||||||
Unaudited Condensed Consolidated Balance Sheets | ||
(In thousands of United States Dollars) | ||
Assets | ||
Current assets | As of 2017 | As of 2016 |
Cash and cash equivalents | 63,297 | 106,678 |
Trade accounts receivable, net | 4,772 | 2,497 |
Prepayments and other assets | 3,046 | 3,943 |
Inventories | 5,315 | 4,761 |
Assets held for sale | 29,027 | — |
Total current assets | 105,457 | 117,879 |
Fixed assets | ||
Vessels, net | 1,265,196 | 1,367,731 |
Total fixed assets | 1,265,196 | 1,367,731 |
Other non-current assets | ||
Above market acquired charters | 75,035 | 90,243 |
Deferred charges, net | 1,519 | 4,154 |
Restricted cash | 18,000 | 18,000 |
Prepayments and other assets | 1,009 | 598 |
Total non-current assets | 1,360,759 | 1,480,726 |
Total assets | 1,466,216 | 1,598,605 |
Liabilities and Partners' Capital | ||
Current liabilities | ||
Current portion of long-term debt, net | 50,514 | 39,568 |
Trade accounts payable | 9,631 | 8,686 |
Due to related parties | 14,234 | 16,095 |
Accrued liabilities | 15,111 | 7,861 |
Deferred revenue, current | 18,800 | 19,986 |
Liability associated with vessel held for sale | 14,781 | — |
Total current liabilities | 123,071 | 92,196 |
Long-term liabilities | ||
Long-term debt, net | 403,820 | 562,619 |
Deferred revenue | 5,920 | 16,033 |
Total long-term liabilities | 409,740 | 578,652 |
Total liabilities | 532,811 | 670,848 |
Commitments and contingencies | ||
Total partners' capital | 933,405 | 927,757 |
Total liabilities and partners' capital | 1,466,216 | 1,598,605 |
Unaudited Condensed Consolidated Statements of Cash Flows | ||||||||||
(In thousands of United States Dollars) | ||||||||||
For the year ended December 31, | ||||||||||
2017 | 2016 | |||||||||
Cash flows from operating activities: | | |||||||||
Net income | 38,483 | 52,489 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
Vessel depreciation and amortization | 73,993 | 71,897 | ||||||||
Amortization and write off of deferred financing costs | 1,262 | 1,250 | ||||||||
Amortization of above market acquired charters | 15,208 | 14,542 | ||||||||
Equity compensation expense | 1,156 | 1,074 | ||||||||
Impairment of vessel | 3,282 | — | ||||||||
Changes in operating assets and liabilities: | ||||||||||
Trade accounts receivable | (2,275) | 183 | ||||||||
Prepayments and other assets | 486 | (600) | ||||||||
Inventories | (719) | (354) | ||||||||
Trade accounts payable | 2,764 | (595) | ||||||||
Due to related parties | (1,861) | (6,059) | ||||||||
Accrued liabilities | 7,624 | 662 | ||||||||
Deferred revenue | (11,299) | 24,267 | ||||||||
Dry-docking costs paid | (1,130) | (3,670) | ||||||||
Net cash provided by operating activities | 126,974 | 155,086 | ||||||||
Cash flows from investing activities: | ||||||||||
Vessel acquisitions and improvements including time charter agreements | (2,038) | (90,782) | ||||||||
Increase in restricted cash | — | (1,000) | ||||||||
Net cash used in investing activities | (2,038) | (91,782 ) | ||||||||
Cash flows from financing activities: | ||||||||||
Proceeds from issuance of Partnership units | 17,815 | 4,546 | ||||||||
Expenses paid for issuance of Partnership units | (247) | (784) | ||||||||
Proceeds from issuance of long-term debt | — | 35,000 | ||||||||
Deferred financing costs paid | (4,993) | (31) | ||||||||
Payments of long-term debt | (129,262) | (17,354) | ||||||||
Dividends paid | (51,630) | (68,193) | ||||||||
Net cash used in financing activities | (168,317) | (46,816 ) | ||||||||
Net (decrease) / increase in cash and cash equivalents | (43,381) | 16,488 | ||||||||
Cash and cash equivalents at the beginning of the year | 106,678 | 90,190 | ||||||||
Cash and cash equivalents at the end of the year | 63,297 | 106,678 | ||||||||
Supplemental cash flow information | ||||||||||
Cash paid for interest | 19,646 | 23,763 | ||||||||
Non-Cash Investing and Financing Activities | ||||||||||
Offering expenses included in liabilities | 35 | 106 | ||||||||
Capital expenditures included in liabilities | 312 | 1,383 | ||||||||
Capitalized dry docking costs included in liabilities | 11 | 1,141 | ||||||||
Deferred financing costs included in liabilities | 79 | — | ||||||||
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 depreciation and amortization expense, amortization of above market acquired charters and straight line revenue adjustments.
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 | 6,760 | 13,744 | 9,651 | |||
Adjustments to reconcile net income to operating surplus prior to Capital Reserve and Class B Preferred Units distribution | ||||||
Depreciation and amortization1 | 19,062 | 18,928 | 19,193 | |||
Amortization of above market acquired charters and straight line revenue adjustments | 1,223 | 1,355 | 1,471 | |||
Impairment of vessel | 3,282 | - | - | |||
Operating Surplus prior to capital reserve and Class B Preferred Units distribution | 30,327 | 34,027 | 30,315 | |||
Capital reserve | (13,208) | (14,644) | (14,644) | |||
Class B preferred units distribution | (2,775) | (2,775) | (2,776) | |||
Operating Surplus after capital reserve and Class B Preferred Units distribution | 14,344 | 16,608 | 12,895 | |||
Increase in recommended reserves | (3,969) | (6,625) | (2,520) | |||
Available Cash | 10,375 | 9,983 | 10,375 |
1Depreciation and amortization line item includes the following components:
- Vessel depreciation and amortization; and
- Deferred financing costs and equity compensation plan amortization.
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