Capital Product Partners L.P. Announces Third Quarter 2016 Financial Results, the Acquisition of the Product Tanker M/T 'Amor' and an Increase to Its Quarterly Distribution From the Fourth Quarter 2016 Onwards to $0.08 per Common Unit
The Partnership's net income for the quarter ended
Operating surplus prior to capital reserves and distributions on the Class
Total revenues for the third quarter of 2016 reached
Total expenses for the third quarter of 2016 were
Total other expense, net for the third quarter of 2016 amounted to
As of
As of
Sale of Hyundai Merchant Marine ("HMM") Shares
As previously announced, HMM, the charterer of five of our container vessels pursued a financial restructuring that was completed in
The Partnership recognized the HMM common shares at their fair value as of the date of their disposal in
Acquisition of M/T 'Amor' and Increase in our Quarterly Distribution to
On
The purchase of the M/T 'Amor' is an arm's-length transaction that was reviewed and unanimously approved by the conflicts committee of our Board of Directors and our entire Board of Directors.
Considering the positive impact of the expansion of our asset base following the acquisition of the M/T 'Amor', the Board decided to approve an increase by
Fleet Employment Update
The M/T 'Atlantas II' (36,760 dwt, Ice Class 1A IMO II/III Chemical Product Tanker built 2006 Hyundai Mipo Dockyard,
The M/T 'Alkiviadis' (36,721 dwt, Ice Class 1A IMO II/III Chemical/ Product, built 2006 Hyundai Mipo Dockyard Company Ltd.,
As a result of the new charters listed above and the acquisition of the M/T 'Amor', our charter coverage for the remainder of 2016 and for 2017 has increased to 97% and 79%, respectively.
Quarterly Common and Class B Unit Cash Distribution
On
In addition, on
ATM Offering
In
Market Commentary
Product & Crude Tanker Markets
The product tanker market experienced lower charter rates in the third quarter of 2016 compared to the previous quarter, as lack of arbitrage opportunities and high product inventories had a negative impact on tonne-mile demand. According to the
In the time charter market, MR rates and activity weakened in the third quarter of 2016 as a result of the softer spot market.
On the supply side, there was minimal activity in terms of new orders for product tankers and the orderbook currently stands at 10.7%, its lowest level since 2000. In addition, the product tanker orderbook continued to experience slippage during the first nine months of 2016, as approximately 27% of the expected MR and handy size tanker newbuildings were not delivered on schedule. Analysts estimate that net fleet growth in 2016 for MR product tankers will be around 4.4% in 2016, while overall demand growth will be approximately 4.1%, as intra-Asian products trade is expected to grow by 5% in 2016, supported by surging Chinese products exports and firm oil demand in the region.
Suezmax spot earnings declined compared to the previous quarter. The declaration of force majeure for most of the quarter at a number of Nigerian export terminals, as a result of militant attacks on oil facilities, led to a significant decline in the volume of cargoes available for Suezmaxes in the West African market. Concurrently, seasonally weak demand and an increased number of crude tanker newbuilding entering the market kept Suezmax rates under pressure. On the positive side, the Suezmax market was supported by solid Chinese crude imports and increased crude flows from
Overall during the period the market remained slow with only limited fixtures reported at decreased rates, due to the depressed spot market.
On the supply side, the Suezmax orderbook represented, at the end of the third quarter of 2016, approximately 19.4% of the current fleet. However, contracting activity has been subdued, with just eleven Suezmax tankers ordered year to date. Suezmax tanker demand is projected to continue growing in 2016 on the back of firm growth in Chinese and Indian crude imports, partly offset by weaker export volumes from
Neo-panamax Container Market
The container charter market remained mostly flat when compared to the previous quarter, as most vessel classes' charter rates were close to historically low levels.
The increase in demand for neo panamax vessels due to the new
By the end of the third quarter of 2016, the idle container fleet had consequently increased from below 5% in the previous quarter to 6.7% at the end of the third quarter of 2016.
Analysts have revised their estimate for the demand for containerized cargo for full-year 2016 down to 3.4% from 3.8% in the previous quarter, and their estimate for the increase in tonnage supply for full-year 2016 to 2.2% from 3.0% in the previous quarter.
The total container vessel demolition until
As of the date hereof, the container orderbook stands at 16.4% of the current fleet, down from 17% in the previous quarter and is the lowest since 1999, while slippage for 8,000+ TEU container vessels amounted to 35%.
Overall market participants expect that the container vessel supply picture might improve further, as the weaker rate environment is expected to induce increased slippage of new deliveries and demolition of existing ships.
Management Commentary
Mr.
"We are pleased to have achieved a number of important milestones during the last few months. First, we concluded our negotiations with HMM and we successfully liquidated the equity compensation received from HMM by recovering approximately 80% of our total charter hire loss under the Charter Restructuring Agreements. Second, we agreed to acquire 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. It is also worth highlighting that our sponsor Capital Maritime has received units as part of the purchase price at a significant premium to the latest closing price of our common units. Additionally, we launched the ATM offering for up to
"Regarding recent market developments, we note that the demand fundamentals for tankers, and especially product tankers, remain solid on the back of refinery capacity relocation, increased tonne-miles, and the low oil price environment. However, the high oil product inventories and the increased supply of tanker vessels has recently weighed on vessel earnings. The limited number of new tanker ordering thus far this year and the rationalization of excess shipyard capacity combined with solid industry fundamentals are positive trends for the tanker markets in the medium- to long-run.
"Finally, we are delighted that with the expected expansion of our fleet, our Board of Directors has approved the increase of our quarterly distribution from the fourth quarter 2016 onwards 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 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 nine month periods ended |
|||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||
| Revenues | $ | 53,390 | $ | 44,451 | $ | 153,138 | $ | 111,797 | ||||
| Revenues - related party | 6,878 | 13,138 | 26,081 | 49,190 | ||||||||
| Total Revenues | 60,268 | 57,589 | 179,219 | 160,987 | ||||||||
| Expenses: | ||||||||||||
| Voyage expenses | 3,326 | 1,822 | 7,338 | 4,233 | ||||||||
| Voyage expenses - related party | 79 | 101 | 268 | 307 | ||||||||
| Vessel operating expenses | 16,404 | 15,244 | 49,095 | 42,880 | ||||||||
| Vessel operating expenses - related party | 2,733 | 3,312 | 8,034 | 9,175 | ||||||||
| General and administrative expenses | 1,782 | 2,167 | 4,503 | 5,340 | ||||||||
| Vessel depreciation and amortization | 18,089 | 16,250 | 53,479 | 45,662 | ||||||||
| Operating income | 17,855 | 18,693 | 56,502 | 53,390 | ||||||||
| Other income / (expense), net: | ||||||||||||
| Interest expense and finance cost | (6,020 | ) | (5,162 | ) | (18,079 | ) | (14,687 | ) | ||||
| Interest and other (expense) / income, net | (65 | ) | 263 | 322 | 1,351 | |||||||
| Total other expense, net | (6,085 | ) | (4,899 | ) | (17,757 | ) | (13,336 | ) | ||||
| Partnership's net income | $ | 11,770 | $ | 13,794 | $ | 38,745 | $ | 40,054 | ||||
| Preferred unit holders' interest in Partnership's net income | 2,776 | 2,853 | 8,326 | 8,481 | ||||||||
| 177 | 218 | 603 | 629 | |||||||||
| Common unit holders' interest in Partnership's net income | 8,817 | 10,723 | 29,816 | 30,944 | ||||||||
| Net income per: | ||||||||||||
| Common unit basic and diluted | $ | 0.07 | $ | 0.09 | $ | 0.25 | $ | 0.27 | ||||
| Weighted-average units outstanding: | ||||||||||||
| Common units basic and diluted | 119,631,339 | 119,559,456 | 119,583,592 | 113,504,765 | ||||||||
| Total comprehensive income: | $ | 11,770 | $ | 13,794 | $ | 38,745 | $ | 40,054 | ||||
| Unaudited Condensed Consolidated Balance Sheets | |||||
| (In thousands of United States Dollars) | |||||
| Assets | |||||
| Current assets | As of 2016 |
As of |
|||
| Cash and cash equivalents | $ | 105,560 | $ | 90,190 | |
| Trade accounts receivable, net | 3,006 | 2,680 | |||
| Prepayments and other assets | 3,459 | 2,547 | |||
| Inventories | 4,406 | 4,407 | |||
| Total current assets | 116,431 | 99,824 | |||
| Fixed assets | |||||
| Advances for vessels under construction - related party | -- | 18,172 | |||
| Vessels, net | 1,352,620 | 1,315,485 | |||
| Total fixed assets | 1,352,620 | 1,333,657 | |||
| Other non-current assets | |||||
| Above market acquired charters | 93,039 | 100,518 | |||
| Deferred charges, net | 5,357 | 3,482 | |||
| Restricted cash | 17,500 | 17,000 | |||
| Prepayments and other assets | 1,758 | 1,394 | |||
| Total non-current assets | 1,470,274 | 1,456,051 | |||
| Total assets | $ | 1,586,705 | $ | 1,555,875 | |
| Liabilities and Partners' Capital | |||||
| Current liabilities | |||||
| Current portion of long-term debt, net | $ | 16,381 | $ | 11,922 | |
| Trade accounts payable | 11,087 | 8,431 | |||
| Due to related parties | 13,225 | 22,154 | |||
| Accrued liabilities | 7,951 | 7,872 | |||
| Deferred revenue, current | 22,660 | 10,867 | |||
| Total current liabilities | 71,304 | 61,246 | |||
| Long-term liabilities | |||||
| Long-term debt, net | 574,146 | 555,888 | |||
| Deferred revenue | 18,410 | 921 | |||
| Total long-term liabilities | 592,556 | 556,809 | |||
| Total liabilities | 663,860 | 618,055 | |||
| Commitments and contingencies | |||||
| Partners' capital | 922,845 | 937,820 | |||
| Total liabilities and partners' capital | $ | 1,586,705 | $ | 1,555,875 | |
| Unaudited Condensed Consolidated Statements of Cash Flows | ||||||
| (In thousands of United States Dollars) | ||||||
| For the nine month periods ended |
||||||
| 2016 | 2015 | |||||
| Cash flows from operating activities: | ||||||
| Net income | $ | 38,745 | $ | 40,054 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Vessel depreciation and amortization | 53,479 | 45,662 | ||||
| Amortization and write off of deferred financing costs | 1,012 | 640 | ||||
| Amortization of above market acquired charters | 10,685 | 11,363 | ||||
| Equity compensation expense | 802 | - | ||||
| Changes in operating assets and liabilities: | ||||||
| Trade accounts receivable | (326 | ) | (360 | ) | ||
| Prepayments and other assets | (1,276 | ) | (1,239 | ) | ||
| Inventories | 1 | (974 | ) | |||
| Trade accounts payable | 2,750 | 1,431 | ||||
| Due to related parties | (8,929 | ) | 7,060 | |||
| Accrued liabilities | 377 | 459 | ||||
| Deferred revenue | 29,308 | (3,426 | ) | |||
| Dry-docking costs paid | (3,670 | ) | (419 | ) | ||
| Net cash provided by operating activities | 122,958 | 100,251 | ||||
| Cash flows from investing activities: | ||||||
| Vessel acquisitions and improvements including time charter agreements | (74,409 | ) | (207,698 | ) | ||
| Increase in restricted cash | (500 | ) | (2,000 | ) | ||
| Net cash used in investing activities | (74,909 | ) | (209,698 | ) | ||
| Cash flows from financing activities: | ||||||
| Proceeds from issuance of Partnership units | 1,637 | 133,327 | ||||
| Expenses paid for issuance of Partnership units | (138 | ) | (739 | ) | ||
| Proceeds from long-term debt | 35,000 | 115,000 | ||||
| Deferred financing costs paid | (31 | ) | (1,797 | ) | ||
| Payments of long-term debt | (13,016 | ) | (119,949 | ) | ||
| Dividends paid | (56,131 | ) | (90,823 | ) | ||
| Net cash (used in) / provided by financing activities | (32,679 | ) | 35,019 | |||
| Net increase / (decrease) in cash and cash equivalents | 15,370 | (74,428 | ) | |||
| Cash and cash equivalents at beginning of period | 90,190 | 164,199 | ||||
| Cash and cash equivalents at end of period | 105,560 | 89,771 | ||||
| Supplemental cash flow information | ||||||
| Cash paid for interest | $ | 17,921 | $ | 12,814 | ||
| Non-Cash Investing and Financing Activities | ||||||
| Issuance costs of Partnership's units included in liabilities | $ | 743 | $ | - | ||
| Capital expenditures included in liabilities | $ | 507 | $ | 79 | ||
| Capitalized dry docking costs included in liabilities | $ | 813 | $ | 1,827 | ||
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 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 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 | 11,770 | 13,794 | 14,873 |
| Adjustments to reconcile net income to operating surplus prior to Capital Reserve and Class B Preferred Units distribution | |||
| Depreciation and amortization1 | 18,604 | 16,542 | 18,423 |
| Amortization of above market acquired charters and straight line revenue adjustments | 1,332 | 2,648 | 3,305 |
| Proceeds from the sale of HMM shares | 29,706 | - | - |
| Operating Surplus prior to capital reserve and Class B Preferred Units distribution | 61,412 | 32,984 | 36,601 |
| Capital reserve | (14,644) | - | (14,644) |
| Class B preferred units distribution | (2,776) | (2,853) | (2,775) |
| Operating Surplus after capital reserve and Class B Preferred Units distribution | 43,992 | 30,131 | 19,182 |
| Increase in recommended reserves | (34,705) | (1,034) | (9,968) |
| Available Cash | 9,287 | 29,097 | 9,214 |
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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