UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

Pursuant to Rule 13a-16 or 15d-16

under the Securities Exchange Act of 1934

For the month of October, 2019

COMMISSION FILE NUMBER: 001-33373

CAPITAL PRODUCT PARTNERS L.P.

(Translation of registrant’s name into English)

3 Iassonos Street

Piraeus, 18537 Greece

(Address of principal executive offices)

Indicate by check mark whether the Registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☒             Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

Attached as Exhibit I are the Unaudited Interim Consolidated Financial Statements of Capital Product Partners L.P. (“CPLP”) for the six month periods ended June 30, 2019 and 2018 and the related Operating and Financial Review and Prospects discussion.

Attached as Exhibit 101 is the following financial information from this Report on Form 6-K for the six month periods ended June 30, 2019 and 2018, filed as part of Exhibit I hereto, formatted in Extensible Business Reporting Language (“XBRL”):

(i) Unaudited Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018;

(ii) Unaudited Condensed Consolidated Statements of Comprehensive (Loss) / Income for the six-month periods ended June 30, 2019 and 2018;

(iii) Unaudited Condensed Consolidated Statements of Changes in Partners’ Capital for the six-month periods ended June 30, 2019 and 2018;

(iv) Unaudited Condensed Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2019 and 2018; and

(v) Notes to the Unaudited Condensed Consolidated Financial Statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Exhibit I

CPLP

Financial Results for the six-month period ended June 30, 2019

Operating and Financial Review and Prospects

You should read the following discussion of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements for the six-month periods ended June 30, 2019 and 2018 and related notes included elsewhere herein. Among other things, the financial statements include more detailed information regarding the basis of presentation for the following information. This discussion contains forward-looking statements that are made based upon management’s current plans, expectations, estimates, assumptions and beliefs concerning future events impacting us and therefore involve a number of risks and uncertainties, including those risks and uncertainties discussed in our Annual Report on Form 20-F for the fiscal year ended December 31, 2018. These risks, uncertainties and assumptions involve known and unknown risks and are inherently subject to significant uncertainties and contingencies, many of which are beyond our control. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unaudited Selected Financial Data

(In thousands of United States Dollars, except earnings per unit, distributions per unit and number of units)

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Our Fleet

The following table summarizes the current employment of our fleet:

Recent Developments

Transaction with DSS Holdings L.P.

On November 27, 2018, we entered into a definitive transaction agreement with DSS Holdings L.P. (“DSS”), pursuant to which we agreed to combine our crude and product tanker business (the “Tanker Business”) with DSS’s businesses and operations in a share-for-share transaction (the “DSS Transaction”). The DSS Transaction was completed on March 27, 2019.

In connection with the DSS Transaction, among other things:

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Change of Manager. In August 2019 we completed the process of changing the manager of our vessels from CSM to Capital-Executive Ship Management Corp. (“Capital-Executive”), a privately held company ultimately controlled by Mr. Miltiadis E. Marinakis. The agreement with Capital-Executive has the same terms and conditions of our floating fee management agreement with CSM. M/V Cape Agamemnon will remain under the management of CSM under our floating fee management agreement with CSM.

Adoption of an amended and restated omnibus incentive compensation plan

As of December 31, 2018, all restricted units issuable under our Omnibus Incentive Compensation Plan (the “Plan”) had been issued. In July 2019, the Board of Directors (the “Board”) adopted an amended and restated Plan, so as to reserve for issuance a maximum number of 740,000 restricted common units. To date no such restricted units have been issued to any person or entity under the Plan.

Quarterly Common Unit Cash Distribution

On May 3, 2019, the Board declared a cash distribution of $0.315 per common unit for the first quarter of 2019, which was paid on May 15, 2019 to common unit holders of record on May 13, 2019.

On July 23, 2019, the Board declared a cash distribution of $0.315 per common unit for the second quarter of 2019, which was paid on August 15, 2019 to common unit holders of record on August 2, 2019.

As previously announced, we intend to review our distributions from time to time in the light of a range of factors, including, among other things, our access to the capital markets, the refinancing of our external debt, the level of our capital expenditures and our ability to pursue accretive transactions. For further information on the risks that may affect our distributions, see “Item 3. Key Information—D. Risk Factors”, including in particular the risk factor entitled “We cannot assure you that we will pay any distributions on our units ” in our Annual Report on Form 20-F for the year ended December 31, 2018, filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 26, 2019.

Fleet Employment

Currently we own a fleet of 11 vessels, consisting of ten Neo-Panamax container vessels and one Dry-bulk vessel.

As of the date of this report, our charter coverage for the rest of 2019 and 2020 is 100.0 % and 91.1%, respectively.

CMA CGM Amazon settlement:

In September 2019, one of our subsidiaries reached a settlement with the U.S. Department of Justice (“DOJ”) regarding the M/V CMA CGM Amazon for oil record book violations. Under the terms of the agreement, the subsidiary pled guilty to oil record book violations with respect to the M/V CMA CGM Amazon. The subsidiary shall pay a fine of up to $500,000 and was placed on probation for 30 months. If, during the term of probation, the subsidiary fails to adhere to the terms of the plea agreement, the DOJ may withdraw from the plea agreement and would be free to prosecute the subsidiary on all charges arising out of its investigation, including any charges dismissed pursuant to the terms of the plea agreement, as well as potentially other charges. The subsidiary is also required to implement an environmental compliance plan in connection with the settlement.

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Change of ownership of our General Partner

Our General Partner is a private company initially formed and controlled by Capital Maritime and Trading Corp. (“Capital Maritime”). In April 2019, Capital Maritime transferred all membership interests in our General Partner to Mr. Miltiadis E. Marinakis as part of a reallocation of various shipping interests and businesses among members of the Marinakis family. Mr. Miltiadis E. Marinakis, born in 1999, is the son of Evangelos M. Marinakis. Although not engaged in day-to-day management, Mr. Miltiadis E. Marinakis holds and oversees certain shipping interests on behalf of the Marinakis family.

Factors Affecting Our Future Results of Operations

Please refer to our Annual Report on Form 20-F for the year ended December 31, 2018, filed on April 26, 2019, regarding the factors affecting our future results of operations.

Results of Operations

Six-Month Period Ended June 30, 2019 Compared to the Six-Month Period Ended June 30, 2018

Our results of operations for the six-month periods ended June 30, 2019 and 2018 differ primarily due to:

Total Revenues

Total revenues, consisting of time and voyage charter revenues, amounted to $54.2 million for the six-month period ended June 30, 2019, compared to $58.2 million for the six-month period ended June 30, 2018. The decrease of $4.0 million was primarily a result of the decrease in the average number of vessels in our fleet by 1.6 vessels during the six-month period ended June 30, 2019, partly offset by the higher average charter rates earned by certain of our vessels and the decrease in off-hire days incurred compared to the corresponding period in 2018. For the six-month periods ended June 30, 2019 and 2018, related party revenues amounted to $0 and $0.7 million, respectively, as no vessels were chartered by Capital Maritime during the six-month period ended June 30, 2019 compared to 0.4 vessels chartered in the corresponding period in 2018. Time and voyage charter revenues are mainly comprised of the charter hires received from unaffiliated third-party charterers and Capital Maritime and are affected by the number of days our vessels operate, the average number of vessels in our fleet and the charter rates.

For the six-month period ended June 30, 2019, HMM and CMA CGM accounted for 41% and 38% of our total revenues from continuing operations, respectively.

Voyage Expenses

Total voyage expenses amounted to $1.1 million for the six-month period ended June 30, 2019, compared to $5.5 million for the six-month period ended June 30, 2018. The decrease of $4.4 million was primarily attributable to the decrease in the number of voyage charters as one of our vessels, the M/T Amore Mio II, was operated under voyage charters during the six-month period ended June 30, 2018, compared to none for the corresponding period in 2019. Voyage expenses primarily consist of bunkers, port expenses and commissions. Voyage expenses incurred during time charters are paid by the charterer, except for commissions, which are paid for by us. Voyage expenses incurred during voyage charters are paid by us.

Vessel Operating Expenses

For the six-month period ended June 30, 2019 our total vessel operating expenses amounted to $13.1 million, compared to $16.2 million for the six-month period ended June 30, 2018. The $3.1 million decrease in total vessel operating expenses primarily reflects the decrease in the number of vessels in our fleet incurring operating expenses, following the disposal of the M/T Amore Mio II and the M/T Aristotelis on October 15 and April 25, 2018 respectively.

Total vessel operating expenses for the six-month period ended June 30, 2019 include expenses of $1.9 million incurred under the management agreements we have with CSM, compared to $2.2 million during the six-month period ended June 30, 2018.

General and Administrative Expenses

General and administrative expenses amounted to $2.0 million for the six-month period ended June 30, 2019, compared to $3.2 million for the six-month period ended June 30, 2018. The decrease of $1.2 million was mainly due to the vesting of awards under the Plan in December 2018. As of June 30, 2019 there were no incentive awards outstanding under the Plan. General and administrative expenses include Board fees and expenses, audit and certain legal fees and other fees related to the requirements of being a publicly traded partnership.

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Vessel Depreciation and Amortization

Vessel depreciation and amortization decreased to $14.5 million for the six-month period ended June 30, 2019, compared to $17.2 million for the six-month period ended June 30, 2018. The $2.7 million decrease in vessel depreciation and amortization primarily reflects the decrease in the number of vessels in our fleet.

Total Other Expense, Net

Total other expense, net for the six-month period ended June 30, 2019 amounted to $8.3 million, compared to $9.1 million for the six-month period ended June 30, 2018. The decrease of $0.8 million reflects lower interest costs incurred as a result of a decrease in the average outstanding debt for the six-month period ended June 30, 2019 compared to the corresponding period in 2018, partly offset by an increase in the LIBOR weighted average interest rate.

The weighted average interest rate on the loan outstanding under our credit facility for the six-month period ended June 30, 2019 was 6.0%, compared to 5.2% for the corresponding period in 2018. See also Note 8 to our unaudited interim condensed consolidated financial statements included elsewhere herein.

Partnership’s Net Income

As a result of the factors described above, the Partnership’s net income for the six-month period ended June 30, 2019 amounted to $15.3 million, compared to $7.2 million for the six-month period ended June 30, 2018.

Liquidity and Capital Resources

As of June 30, 2019, total cash and cash equivalents amounted to $63.1 million including restricted cash under our credit facility of $5.5 million. As of June 30, 2019, there were no undrawn amounts under the terms of our credit facility.

Generally, our primary sources of funds have been cash from operations, bank borrowings and, depending on our access to the capital markets, securities offerings.

Depending on the prevailing market rates when our charters expire, we may not be able to re-charter our vessels at rates similar to those under their current charters or we might trade certain of our vessels in the spot market, which translate into revenues that are inherently more volatile. As a result, our future cash flows from operations may be affected. Cash flows from operations may be further affected by other factors described in our Annual Report on Form 20-F for the year ended December 31, 2018 in “Item 3. Key Information—D. Risk Factors”.

Because we distribute all of our “available cash” (a contractually defined term, generally referring to cash on hand at the end of each quarter after provision for reserves), we generally rely upon external financing sources, including bank borrowings and, depending on our access to the capital markets, securities offerings, to fund replacement, expansion and investment capital expenditures, and to refinance or repay outstanding indebtedness under our credit facility. Since 2011, the Board has elected not to provision cash reserves for estimated replacement capital expenditures. Therefore, our ability to maintain and grow our asset base, including through further dropdown opportunities from Capital Maritime or acquisitions from third parties, and to pay our distributions as well as to maintain a strong balance sheet depends on, among other things, our ability to obtain required financing, access financial markets and refinance part or all of our existing indebtedness on commercially acceptable terms.

In April 2016, in the face of severely depressed trading prices for master limited partnerships, including us, a significant deterioration in our cost of capital and potential loss of revenue, the Board took the decision to protect our liquidity position by creating a capital reserve and setting distributions at a level that our Board believes to be sustainable and consistent with the proper conduct of our business. We used cash accumulated as a result of quarterly allocations to our capital reserve to partially prepay our indebtedness as part of our refinancing in October 2017. We expect to continue to reserve cash in amounts necessary to service our debt in the future, including making quarterly amortization payments. Please see “Item 8A: How We Make Cash Distributions” in our Annual Report on Form 20-F for the year ended December 31, 2018 for further information on our cash distribution policy.

Pursuant to the DSS Transaction, we prepaid an amount of $89.3 million under the 2017 credit facility and fully repaid all amounts outstanding under the Aristaios credit facility and the 2015 credit facility. The aggregate amounts repaid were $146.5 million plus accrued interest and breakage costs.

In March 2019, in connection with the DSS Transaction, we entered into a Deed of Amendment and Restatement agreement with our 2017 credit facility lenders. According to this agreement the amended 2017 credit facility is payable in 19 equal quarterly installments of $7.7 million beginning in April 2019 in addition to a balloon installment of $139.1 million, which is payable together with the final quarterly installment in the fourth quarter of 2023. All other terms and conditions remained unchanged.

During the six-month period ended June 30, 2019 we repaid the amount of $17.3 million in line with the amortization schedule of our 2017 credit facility.

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The table below presents our principal repayment schedule under our 2017 credit facility, as of June 30, 2019:

Subject to our ability to obtain required financing and access financial markets, we expect to continue to evaluate opportunities to acquire vessels and businesses. We currently have no capital commitments to purchase or build additional vessels. For the twelve-month period ending June 30, 2020, we anticipate that eight of our vessels will undergo special survey.

As of June 30, 2019, total partners’ capital amounted to $408.7 million, a decrease of $472.6 million compared to $881.3 million (including discontinued operations) as of December 31, 2018. The decrease was primarily due to the completion of the DSS Transaction, distributions declared and paid in the total amount of $17.1 million for the first half of 2019 and the total net loss of $131.5 million for the period (including an impairment charge of $149.6 million related to the DSS Transaction).

Subject to shipping and charter and financial market developments, we believe that our working capital will be sufficient to meet our existing liquidity needs for at least the next 12 months.

Cash Flows

The following table summarizes our cash and cash equivalents provided by / (used in) operating, investing and financing activities for the periods, presented in millions:

Net Cash Provided by Operating Activities

Net cash provided by operating activities was $12.8 million for the six-month period ended June 30, 2019 compared to $31.2 million for the six-month period ended June 30, 2018. The decrease of $18.4 million was mainly attributable to an increase in the amounts we reimbursed our Manager for expenses paid on our behalf and by an increase in payments for operating and other expenses partly offset by a decrease in our trade receivables due to increased collections.

Net Cash Used in / Provided By Investing Activities

Net cash used in / provided by investing activities refers primarily to cash used for vessel improvements, including equipment for ballast water treatment systems and scrubbers, and cash provided by proceeds from the sale of vessels. Net cash used in investing activities for the six-month period ended June 30, 2019 amounted to $3.0 million compared to net cash provided by investing activities of $29.1 million during the six-month period ended June 30, 2018. The decrease of $32.1 million in net cash flows from investing activities, was primarily attributable to (a) the net proceeds from the sale of the M/T Aristotelis of $29.4 million during the six-month period ended June 30, 2018 compared to the corresponding period in 2019 during which we did not dispose any vessel and (b) the cash used for vessel improvements including advances relating to the purchase of ballast water treatment systems and scrubbers equipment amounting to $3.0 million during the six-month period ended June 30, 2019 compared to $0.3 million for the corresponding period in 2018.

Net Cash Used in Financing Activities

Net cash used in financing activities for the six-month period ended June 30, 2019, was $152.0 million compared to $57.4 million for the six-month period ended June 30, 2018. The increase of $94.6 million in net cash used in financing activities was mainly attributable to the redemption of all outstanding Class B convertible preferred units for the amount of $116.9 million, which occurred in the six-month period ended June 30, 2019 partially offset by (a) the decrease in amortization payments of long-term debt by $13.8 million following, (b) the prepayment of $89.3 million and the consequent amendment of the repayment schedule of our 2017 credit facility and (c) the reduction by $9.2 million in distributions paid to our unit holders during the six-month period ended June 30, 2019 compared to the corresponding period in 2018.

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Borrowings

Our long-term borrowings are reflected in our balance sheet as “Long-term debt, net” and in current liabilities as “Current portion of long-term debt, net”.

As of June 30, 2019, total borrowings of $277.8 million were outstanding under our 2017 credit facility. As of December 31, 2018, our total borrowings relating to continuing operations were $295.1 million.

Credit Facilities

For information relating to our credit facilities, please refer to Note 7 of our audited Consolidated Financial Statements included in the Annual Report on Form 20-F for the year ended December 31, 2018, Note 8 to our unaudited interim condensed consolidated financial statements included elsewhere herein and the description above in “Liquidity and Capital Resources”.

As of June 30, 2019 and December 31, 2018, we were in compliance with all financial debt covenants. Our ability to comply with the covenants and restrictions contained in our credit facility and any other debt instruments we may issue or enter into in the future may be affected by events beyond our control, including prevailing economic, financial and industry conditions, such as interest rate developments, changes in the funding costs offered by our banks and changes in asset valuations. If market or other economic conditions deteriorate, our ability to comply with these covenants may be impaired. If we are in breach of any of the restrictions, covenants, ratios or tests in our credit facility, we are unlikely to be able to make any distributions to our unit holders, a significant portion of our obligations may become immediately due and payable and our lenders’ commitment to make further loans to us, if any, may terminate. We may not have, or be able to obtain, sufficient funds to make these accelerated payments. In addition, obligations under our credit facility are secured by our vessels, and if we are unable to repay debt under the credit facility, the lenders could seek to foreclose on those assets.

Any contemplated vessel acquisitions will have to be at levels that do not impair the required ratios, see “Item 5.B. Liquidity and Capital Resources—Borrowings—Our Credit Facilities” in our Annual Report on Form 20-F for the year ended December 31, 2018. The global economic downturn that has occurred in the last several years has had an adverse effect on vessel values, and economic conditions remain fragile with significant uncertainty surrounding future prospects and long-term economic growth effects. If the estimated asset values of vessels in our fleet decrease, we may be obligated to prepay part of our outstanding debt in order to remain in compliance with the relevant covenants in our credit facility. A decline in the market value of our vessels could also affect our ability to refinance our credit facility and/or limit our ability to obtain additional financing. A decrease of 10% in the aggregate fair market values of our vessels would not cause any violation of the total indebtedness to aggregate market value covenant contained in our credit facility.

Off-Balance Sheet Arrangements

As of June 30, 2019, we have not entered into any off-balance sheet arrangements.

Critical Accounting Policies

A discussion of our critical accounting policies can be found in our Annual Report on Form 20-F for the year ended December 31, 2018.

Changes in Accounting Policies

See Note 2 to our unaudited interim condensed consolidated financial statements included elsewhere herein.

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INDEX TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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Capital Product Partners L.P.

Unaudited Condensed Consolidated Balance Sheets

(In thousands of United States Dollars)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Capital Product Partners L.P.

Unaudited Condensed Consolidated Statements of Comprehensive (Loss) / Income

(In thousands of United States Dollars, except for number of units and earnings per unit)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Capital Product Partners L.P.

Unaudited Condensed Consolidated Statements of Changes in Partners’ Capital

(In thousands of United States Dollars)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

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Capital Product Partners L.P.

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands of United States Dollars)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Capital Product Partners L.P.

Notes to the Unaudited Condensed Consolidated Financial Statements

(In thousands of United States Dollars)

1. Basis of Presentation and General Information

Capital Product Partners L.P. (the “Partnership”) was formed on January 16, 2007, under the laws of the Marshall Islands. The Partnership is an international shipping company. The Partnership currently owns a fleet of eleven high specification vessels consisting of ten Neo Panamax container carrier vessels and one Capesize bulk carrier. Its vessels are capable of carrying a wide range of dry cargoes, as well as containerized goods under short-term voyage charters and medium to long-term time and bareboat charters.

TRANSACTION WITH DSS HOLDINGS L.P.

On November 27, 2018, the Partnership entered into a definitive transaction agreement with DSS Holdings L.P. (“DSS”), pursuant to which the Partnership agreed to combine its crude and product tanker business (the “Tanker Business”) with DSS’s businesses and operations in a share-for-share transaction (the “DSS Transaction”). The DSS Transaction was completed on March 27, 2019.

In connection with the DSS Transaction, among other things:

In accordance with Accounting Standards Update (“ASU”) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, the assets and liabilities, results of operations and cash flows of the Tanker Business are reported as discontinued operations for all periods presented (Note 4).

In addition all per unit data in these unaudited condensed consolidated financial statements has been retrospectively adjusted to reflect the impact of the one-for-seven reverse unit split the Partnership effected on March 27, 2019 in connection with DSS Transaction (Note 10).

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all the information and notes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements and the accompanying notes should be read in conjunction with the Partnership’s consolidated financial statements for the year ended December 31, 2018, included in the Partnership’s Annual Report on Form 20-F for the fiscal year ended December 31, 2018, filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 26, 2019.

These unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation of the Partnership’s financial position, results of operations and cash flows for the periods presented. Operating results for the six-month period ended June 30, 2019 are not necessarily indicative of the results that might be expected for the fiscal year ending December 31, 2019.

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Capital Product Partners L.P.

Notes to the Unaudited Condensed Consolidated Financial Statements

(In thousands of United States Dollars)

2. Significant Accounting Policies

A discussion of the Partnership’s significant accounting policies can be found in the Partnership’s Consolidated Financial Statements included in the Annual Report on Form 20-F for the year ended December 31, 2018 (the “Consolidated Financial Statements for the year ended December 31, 2018”).

Changes in Accounting Policies

ASU 2016-02- Leases (Topic 842): The Partnership adopted this standard for the reporting period commencing on January 1, 2019 and elected the practical expedient under ASU 2018-11 for the vessels under time charter agreements. Furthermore, the Partnership applied the transition provisions of ASU 2016-02 at its adoption date, rather than the earliest comparative period presented in the financial statements, as permitted by ASU 2018-11. The nature of the lease component and non-lease component that were combined as a result of applying the practical expedient are the contract for the hire of a vessel and the fees for operating and maintaining the vessel respectively. The lease component is the predominant component and the Partnership accounts for the combined component as an operating lease in accordance with Topic 842. The Partnership applied Topic 842 with no significant impact on its financial statements and as a result no adjustment was posted in the Partnership’s opening retained earnings as of January 1, 2019. Please refer to Note 3 for further details.

3. Recognition of revenue from continuing operations

The following table shows the revenues from continuing operations earned from time and voyage charters contracts for the six-month period ended June 30, 2019 and 2018:

For the six-month period ended June 30, 2019 all of our time charters revenue is accounted for under Topic 842. For the six-month period ended June 30, 2018 all of our time charters revenue is accounted for under ASC 840.

Time charters contracts

A time charter is a contract for the use of a vessel for a specific period of time and a specified daily charter hire rate, which is generally payable in advance. A time charter generally provides typical warranties and owner protective restrictions. The performance obligations in a time charter are satisfied over the term of the contract beginning when the vessel is delivered to the charterer until it is redelivered back to the owner of the vessel. The time charter contracts are considered operating leases and therefore fall under the scope of ASC 842 because (i) the vessel is an identifiable asset (ii) the owner of the vessel does not have substantive substitution rights and (iii) the charterer has the right to control the use of the vessel during the term of the contract and derives the economic benefits from such use. Revenues from time charters are recognized rateably on a straight line basis over the period of the respective charter. Under time charter agreements, all voyages expenses, except commissions are assumed by the charterer. Operating costs incurred for running the vessel such as crew costs, vessel insurance, repairs and maintenance and lubricants are paid by the Partnership under time charter agreements.

The transition guidance associated with ASC 842 allows for certain practical expedients to the lessors. The Partnership elected to not separate the lease and non-lease components included in the time charter revenue because the pattern of revenue recognition for the lease and non-lease components (included in the daily hire rate) is the same. The daily hire rate represents the hire rate for a time charter as well as the compensation for expenses for operating and maintaining the vessel such as crew costs, vessel insurance, repairs and maintenance and lubricants. Both the lease and non-lease components are earned by passage of time.

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Capital Product Partners L.P.

Notes to the Unaudited Condensed Consolidated Financial Statements

(In thousands of United States Dollars)

4. Discontinued Operations

The Partnership’s discontinued operations relate to the operations of Diamond S, as following the spin-off, the Partnership has no continuing involvement in this business (Note 1).

Summarized selected operating results of the Partnership’s discontinued operations for the six-month periods ended June 30, 2019 and 2018 were as follows:

As the Partnership spun off its Tanker Business before June 30, 2019, assets and liabilities contributed to the DSS Transaction are no longer included in the unaudited condensed consolidated balance sheet as of June 30, 2019. Balance sheet information of the Partnership’s discontinued operations as of December 31, 2018 was as follows:

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Capital Product Partners L.P.

Notes to the Unaudited Condensed Consolidated Financial Statements

(In thousands of United States Dollars)

5. Transactions with related parties

The Partnership and its subsidiaries have related party transactions with CSM and the Partnership’s general partner, Capital GP L.L.C. (“CGP”) arising from certain terms of the following management and administrative services agreements.

Balances and transactions with related parties consisted of the following:

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Capital Product Partners L.P.

Notes to the Unaudited Condensed Consolidated Financial Statements

(In thousands of United States Dollars)

6. Fixed assets

Vessels, net

An analysis of vessels, net is as follows:

All of the Partnership’s vessels as of June 30, 2019 have been provided as collateral to secure the Partnership’s credit facility.

During the six-month periods ended June 30, 2019 and 2018, certain of the Partnership’s vessels underwent improvements. The costs of these improvements amounted to $165 and $257 respectively and were capitalized as part of the vessels’ cost.

During the six-month period ended June 30, 2019, the Partnership paid advances relating to the construction of exhaust gas cleaning systems and ballast water treatment systems that will be installed to certain of its vessels of $2,910, which are included in “Prepayments and other assets” within non-current assets in the unaudited condensed consolidated balance sheets. For the six-month period ended June 30, 2018, the Partnership did not pay any advances relating to the construction of exhaust gas cleaning systems and ballast water treatment systems.

7. Above market acquired charters

Above market charters acquired are amortized using the straight line method as a reduction to revenues over the remaining term of the charters. For the six-month periods ended June 30, 2019 and 2018, revenues were reduced by $7,131 for each period, as a result of the amortization of the above market acquired charters.

An analysis of above market acquired charters is as follows:

As of June 30, 2019, the remaining carrying amount of unamortized above market acquired time charters was $53,524 and will be amortized in future years as follows:

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Capital Product Partners L.P.

Notes to the Unaudited Condensed Consolidated Financial Statements

(In thousands of United States Dollars)

8. Long-Term Debt

As of June 30, 2019 and December 31, 2018 the Partnership’s long-term debt consisted of the following:

Details of the Partnership’s credit facilities are discussed in Note 7 of the Partnership’s Consolidated Financial Statements for the year ended December 31, 2018.

In connection with the DSS Transaction (Note 1), the Partnership prepaid an amount of $89,298 under the 2017 credit facility and fully repaid all amounts outstanding under the 2015 credit facility and the Aristaios credit facility. The aggregate amounts repaid were $146,517 plus accrued interest and breakage costs. The Partnership presents associated amounts of long-term debt outstanding as of December 31, 2018 and interest expense and amortization of deferred loan issuance costs for the six-month periods ended June 30, 2019 and 2018 relating to the Tanker Business contributed in the DSS Transaction within discontinued operations (Note 4).

In March 2019, in connection with the DSS Transaction (Note 1), the Partnership entered into a Deed of Amendment and Restatement agreement with its 2017 credit facility lenders. According to this agreement, the amended 2017 credit facility is payable in 19 equal quarterly installments of $7,703 beginning in April 2019 in addition to a balloon installment of $139,130, which is payable together with the final quarterly installment in the fourth quarter of 2023. All other terms and conditions remained unchanged.

During the six-month period ended June 30, 2019 the Partnership repaid the amount of $17,326 in line with the amortization schedule of its 2017 credit facility.

As of June 30, 2019 and December 31, 2018 the Partnership was in compliance with all financial debt covenants.

For the six-month periods ended June 30, 2019 and 2018, interest expense from continuing operations amounted to $8,426 and $8,715, respectively and the weighted average interest rate of the Partnership’s loan facilities was 6.0% and 5.2% respectively.

9. Financial Instruments

The Partnership follows the accounting guidance for financial instruments that establishes a framework for measuring fair value under generally accepted accounting principles and expands disclosure about fair value measurements. This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The statement requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;

Level 2: Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly;

Level 3: Inputs are unobservable inputs for the asset or liability.

(a) Fair value of financial instruments

The carrying value of cash and cash equivalents and restricted cash, which are considered Level 1 items as they represent liquid assets with short-term maturities, trade receivables, due to related parties, trade accounts payable and accrued liabilities, approximates their fair value. The fair value of long-term variable rate bank loan approximates the recorded value, due to its variable interest being the LIBOR and due to the fact the lenders have the ability to pass on their funding cost to the Partnership under certain circumstances, which reflects its current assessed risk. The Partnership believes that the terms of its loan are similar to those that could be procured as of June 30, 2019. LIBOR rates are observable at commonly quoted intervals for the full term of the loan and accordingly the bank loan is considered Level 2 item in accordance with the fair value hierarchy.

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Capital Product Partners L.P.

Notes to the Unaudited Condensed Consolidated Financial Statements

(In thousands of United States Dollars)

9. Financial Instruments - Continued

(b) Concentration of credit risk

Financial instruments which potentially subject the Partnership to significant concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. The Partnership places its cash and cash equivalents, consisting mostly of deposits with a limited number of creditworthy financial institutions rated by qualified rating agencies. Most of the Partnership’s revenues were derived from a few charterers. For the six-month periods ended June 30, 2019 and 2018 there were two customers that each accounted for more than 10% of the Partnership’s revenues from continuing operations for each period. The Partnership does not obtain rights of collateral from its charterers to reduce its credit risk.

10. Partners’ Capital

As of June 30, 2019 and December 31, 2018 the Partnership’s partners’ capital was comprised of the following units:

On March 27, 2019, in connection with the DSS Transaction, the Partnership effected a reverse split of its common and general partner units, reducing the number of common units issued and outstanding from 127,246,692 to 18,178,100 and the number of general partner units issued and outstanding from 2,439,989 to 348,570. In addition, the Partnership redeemed and retired all outstanding Class B Convertible Preferred Units at 100% of par value, translating into a redemption price of $116,850, and paid to Class B Convertible Preferred Units holders the pro-rata dividends for the period from January 1, 2019 to March 27, 2019, which amounted to $2,652. The difference between the carrying amount of Class B Convertible Preferred Units at the time of their redemption and their redemption price amounted to $6,344. The difference was considered as deemed dividends to preferred unit holders and was presented as income attributable to preferred unit holders in the Partnership’s unaudited condensed consolidated financial statements.

Details of the Partnership’s partner’s capital are discussed in Note 12 of the Partnership’s Consolidated Financial Statements for the year ended December 31, 2018.

During the six-month periods ended June 30, 2019 and 2018, the Partnership declared and paid the following distributions to its common and preferred unit holders:

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Capital Product Partners L.P.

Notes to the Unaudited Condensed Consolidated Financial Statements

(In thousands of United States Dollars)

11. Net Income Per Unit from continuing operations

The general partner’s and common unit holders’ interests in net income are calculated as if all net income for periods subsequent to April 4, 2007 were distributed according to the terms of the Partnership’s Limited Partnership Agreement (the “Partnership Agreement”), regardless of whether those earnings would or could be distributed. The Partnership Agreement does not provide for the distribution of net income; rather, it provides for the distribution of “available cash”, which is a contractually defined term that generally means all cash on hand at the end of each quarter after establishment of cash reserves determined by the Partnership’s board of directors to provide for the proper resources for the Partnership’s business. Unlike available cash, net income is affected by non-cash items. The Partnership follows the guidance relating to the Application of the Two-Class Method and its application to Master Limited Partnerships and considers whether the incentive distributions of a master limited partnership represent a participating security when considered in the calculation of earnings per unit under the Two-Class Method.

The Partnership also considers whether the Partnership Agreement contains any contractual limitations concerning distributions to the incentive distribution rights that would impact the amount of earnings to allocate to the incentive distribution rights for each reporting period.

Under the Partnership Agreement, the holder of the incentive distribution rights in the Partnership, which is currently CGP, assuming that there are no cumulative arrearages on common unit distributions, has the right to receive an increasing percentage of cash distributions after the minimum quarterly distribution. The Partnership also excluded the effect of the 12,983,333 Class B Convertible Preferred Units in calculating dilutive Earnings Per Unit (“EPU”) for the six-month periods ended June 30, 2019 and 2018, as they were anti-dilutive.

As of June 30, 2018 the Partnership excluded the effect of 77,857 (adjusted for the March 2019 reverse split) non-vested unit awards in calculating dilutive EPU for its common unitholders, as they were anti-dilutive. The non-vested units were participating securities because they received distributions from the Partnership and these distributions did not have to be returned to the Partnership if the non-vested units were forfeited by the grantee. All awards vested on December 31, 2018.

The Partnership’s net income for the six-month periods ended June 30, 2019 and 2018 did not exceed the First Target Distribution Level of $1.6975 per unit per quarter, as such term is defined in the Partnership Agreement, and as a result, the assumed distribution of net income did not result in the use of increasing percentages to calculate CGP’s interest in net income.

The Two-Class Method was used to calculate EPU as follows:

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Capital Product Partners L.P.

Notes to the Unaudited Condensed Consolidated Financial Statements

(In thousands of United States Dollars)

12. Commitments and Contingencies

Various claims, suits and complaints, including those involving government regulations and product liability, arise in the ordinary course of the shipping business. In addition, losses may arise from disputes with charterers, agents, insurance and other claims with suppliers relating to the operations of the Partnership’s vessels. The Partnership is not aware of any such claims or contingent liabilities, which should be disclosed, or for which a provision should be established in the unaudited condensed consolidated financial statements.

The Partnership accrues for the cost of environmental liabilities when management becomes aware that a liability is probable and is able to reasonably estimate the probable exposure. Currently, the Partnership is not aware of any such claims or contingent liabilities, which should be disclosed, or for which a provision should be established in the unaudited condensed consolidated financial statements.

Future minimum rental receipts, excluding any profit share revenue that may arise, based on non-cancellable long-term time charters, as of June 30, 2019 are:

As of June 30, 2019 the Partnership has outstanding commitments for all of its vessels relating to the construction of exhaust gas cleaning systems and ballast water treatment systems.which are payable as follows:

13. Subsequent events

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