Costamare (CMRE) Q2 2019 Earnings Call Transcript

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Costamare (NYSE: CMRE)
Q2 2019 Earnings Call
Jul 25, 2019, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Thank you for standing by, ladies and gentlemen, and welcome to the Costamare Inc. conference call on the second-quarter 2019 financial results. We have with us Mr. Gregory Zikos, chief financial officer of the company.

[Operator instructions] I must advise you that this conference is being recorded today, Thursday, July 25, 2019. We would like to remind you that this conference call contains forward-looking statements. Please take a moment to read slide number two of the presentation, which contains the forward-looking statements. And I would now pass the floor to your speaker today, Mr.

Zikos. Please go ahead, sir.

Gregory Zikos -- Chief Financial Officer

Thank you, and good morning, ladies and gentlemen. During the second quarter of the year, the company delivered profitable results. Net income and earnings per share more than doubled compared to the same period of last year. Charter rates for the larger container ships continue to improve, boosted by service upgrades and a reduction in supply due to scrubber fittings.

We have chartered, in total, 18 vessels over the last months, benefiting from a rising market in the larger-asset classes. On the financing side, we arranged financing agreements for an aggregate amount of $460 million, proactively extending maturities relating to 10 vessels and raising 100% financing for the scrubber installation on five ships. And now moving to the slide presentation. On Slide 3, you can see the highlights.

The adjusted EPS is $0.23. Over the past quarter, we have signed new financings for total amount of $460 million, proactively refinancing and extending various maturities and financing 100% of scrubbers to be installed on five vessels. We do maintain a strong balance sheet with approximately 43% leverage, and we have no off-balance sheet financing. Over the last months, we have chartered, in total, 18 vessels.

Regarding the market, charter rates for larger vessels have continued their upward momentum. The added fleet has dropped 1.6%, and the fleet's net growth in 2019 is estimated at around 3%. On Slide 4 and Slide 5, you can see a summary of our recent charting activity. What's worth mentioning on Slide 4 is the increase in the charter rates for the larger vessels compared to last than.

Over the next year, 16 Post Panamax Containerships are due for rechartering, which provides us with significant upside should the momentum continue. On Slide 5, you can see the forward fixing of the five 8,800 TEU container ships, which have increased our contracted revenues by about $185 million. Moving on to Slide 6. You can see the new financings for the total amount of $460 million.

All the refinances have been concluded with the exception of the one, involving the vessels Valor and Valiant, which is expected to be concluded within this month. The recent maturities have been extended by an average of four years. We do not have any substantial loans maturing over the next two years. On Slide 7, you can see our dividend payments, as well as the sale of one vessel, which was co-owned with York Capital.

On Slide 8, we show our second-quarter 2019 results. During the second quarter of this year, the company generated revenues of $117 million and total net income of $26.2 million. The second quarter adjusted EPS amounts to $0.23. Our adjusted figures take into consideration the following noncash items: the average other revenues; account gains or losses for month disclosures; prepaid lease rentals; and noncash charges.

On Slide 9, we are showing the revenue contribution for our fleet. Almost 100% of our deposit cash comes from physical charters like Maersk, MSC, Evergreen, Cosco Guangzhou, and Hapag-Lloyd. Today, we have $2.4 billion in contracted revenues and a remaining time-charter duration of about 3.9 years. On the last Slide, we are discussing the market.

Regarding charter rates, there has been a further strengthening in the market during Q2. The idle fleet has fallen to a low level of 1.6%. The order book has been steadily decreasing to 11%. As already mentioned, we are actively looking for new transactions in this market environment.

This concludes our presentation, and we can now take questions. Thank you. Operator, we can take question now.

Questions & Answers:

Operator

Thank you, sir. [Operator instructions] And your first question will be from Chris Wetherbee with Citi. Please go ahead.

James Yoon -- Citi -- Analyst

Hi, guys. James on for Chris. I just wanted to ask a question about [Inaudible] per day. It seems to have moved down sequentially.

It was a bit lower than we were looking for. Just wanted to know what might have been driving that? And if there's any special items we should be considering in there?

Gregory Zikos -- Chief Financial Officer

Sorry, I could not hear very clearly your question. You mind repeating?

James Yoon -- Citi -- Analyst

Yes. Can you hear this?

Gregory Zikos -- Chief Financial Officer

Yes. This is much better, yes.

James Yoon -- Citi -- Analyst

I wanted to ask a question about vessel opex per day, excluding D&A. It was down sequentially and a bit lower than we were expecting. Just wanted to know if there are any special items we should be considering in it and also sort of get your outlook for it moving forward.

Gregory Zikos -- Chief Financial Officer

Oh, you're right, yes. Look, daily operating expenses, and these are pure operating expenses excluding G&A. In this quarter, it was close to $5,100 per day per vessel. This is by taking all the operating expenses and dividing by the ownership days, which is largely lower compared to the last quarter or the quarter before.

There are no specific items that sort of can be highlighted to say. This is the main reason. I would say that -- I mean, I would say that generally, we are trying to be conservative and also efficient in running the vessels. So there is nothing specific to highlight on that.

But I mean I would agree that $5,100 per day for a fleet which is, on average, of a size of above 7,000 TEUs, I consider this to be quite competitive.

James Yoon -- Citi -- Analyst

Got it. Also wanted to get an update on the interest that you're receiving in doing more scrubber deals? And whether it's picking up? Or if it's essentially blacked out since the last quarter?

Gregory Zikos -- Chief Financial Officer

I think since the last quarter, I think, we have not received any requests. As of now, it stay a total of 15 vessels, including five new buildings where scrubbers will be installed. These are the five new buildings that we contracted last year with Yan Ming. And five MSC vessels and five ships with Evergreen.

All these are larger vessels with a long-term, time-charter coverage. Apart from those, the instances which we have already announced, we have not been receiving any new requests.

James Yoon -- Citi -- Analyst

Got it. Thank you.

Gregory Zikos -- Chief Financial Officer

Thank you.

Operator

[Operator instructions] The next question comes from Ben Nolan with Stifel. Please go ahead.

Frank Galanti -- Stifel Financial Corp. -- Analyst

Yeah, hi. This is Frank Galanti on for Ben. I wanted to ask about any potential demand or competition for new buildings, new building contracts for miners, if you're seeing any additional demand for that?

Gregory Zikos -- Chief Financial Officer

Look, there have been in the market some rumors about new building projects from liners. I cannot comment more on that. It's just that what you also see in the market, but I mean -- but I have to say that compared to the competition that we faced years ago, either for new building projects or -- and also for secondhand ships there in the water, other sale in this back stretcher, today, the competition is definitely much less. There are less pure shipowners, tonnage providers like ourselves, who do have access to debt or to equity and who can fund these capex type of -- capex-intensive type of assets.

So there's definitely less competition compared to years ago. I cannot be – new building projects.

Frank Galanti -- Stifel Financial Corp. -- Analyst

Okay. Yes, that makes sense. And then just a kind of a maybe a quicker question, but it looks like accrued charter revenue moved from negative to positive this quarter. Is that per your expectation going forward?

Gregory Zikos -- Chief Financial Officer

Yes. I mean we have a specific schedule for the accrued charter revenues, which is a U.S. GAAP requirement. So if you have extensions in the charter age with the same charter or like a charter rate that sort of goes up and down during the whole charter period, we have to get an average.

And it's either positive or negative, depending on the time at where we are accounting for that revenue. Now it has turned positive. If you want -- because we do have a schedule for the contracted revenues up to today, we can share it with you offline, so that you can see how it is expected to be over the next quarters.

Frank Galanti -- Stifel Financial Corp. -- Analyst

Yeah, that would be helpful. That's all I had. Thanks very much.

Gregory Zikos -- Chief Financial Officer

Sure, thank you.

Operator

[Operator instructions] Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Gregory Zikos for any closing remarks.

Gregory Zikos -- Chief Financial Officer

Thank you for dialing in today. We are looking forward to speaking with you again during the next quarterly results call. Thank you.

Operator

[Operator signoff]

Duration: 13 minutes

Call participants:

Gregory Zikos -- Chief Financial Officer

James Yoon -- Citi -- Analyst

Frank Galanti -- Stifel Financial Corp. -- Analyst

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