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Capital Product Partners L.P. Announces First Quarter 2019 Financial Results

14 Μαΐου 2019.

capitalpl8Capital Product Partners L.P. (the “Partnership,” or “CPLP”) (NASDAQ: CPLP), an international owner of ocean-going vessels, released its financial results for the first quarter ended March 31, 2019.

As previously announced, the share-for-share transaction with DSS Holdings L.P. (the “DSS Transaction”), involving debt prepayment in the aggregate principal amount of $146.5 million, the full redemption and retirement of our Class B Convertible Preferred Units (the “Class B Units”) at par value and the spin-off of our 25 crude and product tankers (the “Tanker Business”), was completed on March 27, 2019.

We currently own a fleet of 11 vessels, consisting of ten neo panamax container vessels and one drybulk vessel.

In this press release, we present our financial results for the three months ended March 31, 2019, as well as comparative periods, on a continuing operations basis, except where reference is made to discontinued operations.

For the first quarter of 2018, our financial results from continuing operations include revenues, expenses and cash flows arising from, in addition to our current fleet of 11 vessels, the M/T Amore Mio II, which we sold and delivered on October 15, 2018 and the M/T Aristotelis, which we sold and delivered on April 25, 2018. These two tankers were not part of the Tanker Business that we spun off in the DSS Transaction.

All per unit data have been retrospectively adjusted to reflect the impact of the one-for-seven reverse unit split we effected on March 27, 2019.

 

Overview of First Quarter 2019 Results

 

Net income from continuing operations for the quarter ended March 31, 2019 was $7.2 million, compared to net income from continuing operations of $3.0 million for the first quarter of 2018. After taking into account the preferred interest in net income attributable to the holders of the Class B Units (which includes, for the quarter ended March 31, 2019, the original issue discount of certain Class B Units that were redeemed as part of the DSS Transaction) and the interest attributable to the general partner, net loss from continuing operations per common unit for the quarter ended March 31, 2019 was $0.10, compared to net income per common unit of $0.01 for the first quarter of 2018.

Total revenue was $26.8 million for the quarter ended March 31, 2019, reflecting a decrease of 9% compared to $29.4 million during the first quarter of 2018. The decrease in revenue was mainly attributable to the period-on-period decrease in the average number of our vessels as our fleet included the M/T Amore Mio II and the M/T Aristotelis in the first quarter of 2018 (which we disposed of in October 2018 and April 2018, respectively), partially offset by the increase in the average charter rates earned by certain of our vessels compared to the first quarter of 2018.

Total expenses for the quarter ended March 31, 2019 were $15.4 million, compared to $21.9 million in the first quarter of 2018. Voyage expenses for the quarter ended March 31, 2019 decreased to $0.5 million, compared to $3.2 million in the first quarter of 2018, mainly due to the period-on-period decrease in the number of days during which certain of our vessels were employed under voyage charters. Total vessel operating expenses during the first quarter of 2019 amounted to $6.6 million, compared to $8.4 million during the first quarter of 2018. The decrease in operating expenses was mainly due to the decrease in the average number of vessels in our fleet following the disposal of the M/T Amore Mio II and the M/T Aristotelis. Total expenses for the first quarter of 2019 also include vessel depreciation and amortization of $7.2 million, compared to $8.6 million in the first quarter of 2018. The decrease in depreciation and amortization was similarly attributable to the decrease in the average number of vessels in our fleet. General and administrative expenses for the first quarter of 2019 amounted to $1.0 million as compared to $1.7 million in the first quarter of 2018. Transaction expenses related to the DSS Transaction were recognized and presented under discontinued operations.

Total other expense, net for the quarter ended March 31, 2019 was $4.2 million compared to $4.5 million for the first quarter of 2018. Total other expense, net includes interest expense and finance costs of $4.6 million for both the first quarter of 2019 and the first quarter of 2018.

 

Capitalization of the Partnership

 

As of March 31, 2019, total cash, including restricted cash under our 2017 credit facility, amounted to $79.0 million. Restricted cash under our 2017 credit facility amounted to $5.5 million.

As of March 31, 2019, total partners’ capital amounted to $406.7 million, a decrease of $474.6 million compared to $881.3 million (including discontinued operations) as of December 31, 2018. The decrease was primarily due to the spin-off of the Tanker Business, the redemption of our Class B Units at par value for $116.9 million, distributions declared and paid in the total amount of $11.3 million for the first quarter of 2019 and the total net loss of $139.3 million for the period (including an impairment charge of $149.6 million related to the DSS Transaction as further described below). The impact of these factors on total partners’ capital was partially offset by the receipt of $319.7 million from DSS as per the terms of the DSS Transaction.

As of March 31, 2019, the Partnership’s total debt was $285.5 million, reflecting a decrease of $160.4 million compared to $445.9 million (including discontinued operations) as of December 31, 2018. The decrease is attributable to the prepayment of our debt of $146.5 million in connection with the DSS Transaction and scheduled principal amortization for the period.

 

Operating Surplus

 

Operating surplus for the quarter ended March 31, 2019 (including the contribution of the Tanker Business) amounted to $30.5 million, compared to $26.0 million for the first quarter of 2018, and $33.4 million for the previous quarter ended December 31, 2018. For the first quarter of 2019, we allocated $7.7 million to the capital reserve compared to $13.6 million in the previous quarter reflecting the reduction in CPLP’s total outstanding indebtedness. Operating surplus after the quarterly allocation to the capital reserve and the accrued distributions of the Class B Units outstanding until their redemption on March 27, 2019, was $20.2 million for the quarter ended March 31, 2019. Operating surplus is a non-GAAP financial measure used by certain investors to evaluate the financial performance of the Partnership and other master limited partnerships. Please refer to “Appendix A” at the end of the press release for a reconciliation of this non-GAAP measure with net income.

 

Discontinued Operations

 

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 and results of operations of the Tanker Business we spun off in the DSS Transaction are reported as discontinued operations for all periods presented.

Net loss from discontinued operations for the first quarter ended March 31, 2019 was $146.5 million, or $7.91 per unit, compared to net income from discontinued operations of $2.3 million, or $0.12 per unit for the first quarter of 2018. Results from discontinued operations for the first quarter of 2019 reflect a charge of $149.6 million to reduce the carrying value of the vessels forming part of the Tanker Business to their estimated fair value.

 

Quarterly Common Unit Cash Distribution

 

On May 3, 2019, the Board of Directors of the Partnership (the “Board”) declared a cash distribution of $0.315 per common unit for the first quarter of 2019 payable on May 15, 2019 to common unit holders of record on May 13, 2019.

 

Market Commentary

Neo-Panamax Container Market

 

Neo-Panamax container vessels experienced increased activity during the first quarter of 2019, compared to the fourth quarter of 2018. While charter rates for feeder and panamax vessels remained relatively flat due to, among other things, the overhang of idle tonnage, charter rates for Neo-panamax vessels, especially 8,000 TEU designs or larger, saw marked increases, with 12-month charters being contracted at average daily gross rates of approximately $24,000.

At the end of the first quarter of 2019, the idle container fleet was estimated to represent approximately 3.2% of the current worldwide fleet, a slight uptick from the end of 2018. However, the idle fleet has since then declined to an estimated 1.5% of the current worldwide fleet as at the end of April 2019.

At the end of the first quarter of 2019, the container orderbook remained close to historically low levels and was estimated by analysts to stand at 12.6% of the current worldwide fleet. Non-delivery (slippage) of new containership capacity expected to be delivered in the first quarter 2019 is estimated by analysts to be 41% in TEU terms. Further, scrapping in the first quarter of 2019 is estimated to have increased to 70,000 TEU compared to 24,600 TEU in the first quarter of 2018.

 

Management Commentary

 

Mr. Jerry Kalogiratos, Chief Executive Officer of our General Partner, commented: “The first quarter of 2019 marked an important milestone for the Partnership, as it saw the completion of the spin-off and merger of our Tanker Business with DSS in a strategic transaction for the Partnership. We believe that to date the DSS transaction has overall been an accretive transaction for our unitholders. Among other metrics, the sum-of-the-part equity value as of the date of this announcement was greater than the stand-alone market capitalization of CPLP immediately before the consummation of the transaction.”

“Importantly, this transaction allows CPLP to reshape its business towards a modern fleet with remaining charter duration of more than five years, providing CPLP unitholders with increased stability and cash flow visibility. On that basis, we are looking forward to expanding our asset base again with modern vessels employed under medium- to long-term charters with a view to growing our long-term distributable cash flow.”

 

About Capital Product Partners L.P.

 

Capital Product Partners L.P. (NASDAQ: CPLP), a Marshall Islands master limited partnership, is an international owner of ocean-going vessels. CPLP currently owns 11 vessels, including ten neo panamax container vessels and one capesize bulk carrier.

Full report: Capital Product Partners, L.P.

 

 

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