Capital Product Partners announces Q2 2016 financial results
Capital Product Partners L.P., an international diversified shipping partnership, has released its financial results for the second quarter ended June 30, 2016.
The Partnership's net income for the quarter ended June 30, 2016 was $14.9 million. After taking into account the preferred interest in net income attributable to the unit holders of the 12,983,333 Class B Convertible Preferred Units outstanding as of June 30, 2016 (the "Class B Units" and the "Class B Unitholders"), and the general partner's interest in the Partnership's net income, net income per common unit for the quarter ended June 30, 2016 was $0.10, compared to $0.08 during the previous quarter ended March 31, 2016 and $0.09 during the second quarter of 2015.
Operating surplus prior to Class B Units distributions for the quarter ended June 30, 2016 amounted to $36.6 million, an increase of 15% compared to $31.7 million during the second quarter of 2015 and an increase of 12% to $32.8 million during the first quarter of 2016. The Partnership has put aside $14.6 million in capital reserves for the quarter. As announced on April 26, 2016, the Partnership intends to maintain this capital reserve for the foreseeable future to fully provide for the debt repayments coming due in the next three years, until the end of 2018. Operating surplus after the capital reserve and distributions to the Class B Unitholders was $19.2 million for the quarter ended June 30, 2016. Operating surplus is a non-GAAP financial measure used by certain investors to measure the financial performance of the Partnership and other master limited partnerships.
Total revenues for the second quarter of 2016 reached $60.9 million, an increase of 12% compared to $54.5 million during the second quarter of 2015. The increase was primarily a result of the increase in the size of the Partnership's fleet.
Total expenses for the second quarter of 2016 were $40.3 million compared to $35.6 million in the second quarter of 2015. Total vessel operating expenses during the second quarter of 2016 amounted to $18.7 million, an increase of 6%, compared to $17.7 million during the second quarter of 2015. The increase reflects primarily the expansion of our fleet. Total expenses for the second quarter of 2016 include vessel depreciation and amortization of $17.9 million, an increase of 19%, compared to $15.0 million in the second quarter of 2015, also due to the expansion of our fleet. General and administrative expenses for the second quarter of 2016 increased to $1.5 million, compared to $1.3 million in the second quarter of 2015, mainly due to expenses recognized in connection with the Partnership's Omnibus Incentive Compensation Plan.
Total other expense, net for the second quarter of 2016 amounted to $5.7 million, compared to $4.8 million for the second quarter of 2015. Total other expenses, net included interest expenses and finance costs of $6.0 million in the second quarter of 2016, compared to $4.8 million during the second quarter of 2015. The increase primarily reflects higher interest costs incurred during the second quarter of 2016.
As of June 30, 2016, total partners' capital amounted to $921.2 million, a decrease of $16.6 million compared to $937.8 million as of December 31, 2015. The decrease primarily reflects distributions declared and paid during the first half of 2016, partially offset by net income for the period.
As of June 30, 2016, the Partnership's total debt increased by $26.3 million to $597.9 million, compared to $571.6 million as of December 31, 2015. The increase was due to a $35.0 million drawdown under our senior secured credit facility with ING Bank to fund the acquisition of the M/V 'CMA CGM Magdalena', which was delivered in February 2016, partially offset by $8.7 million of scheduled loan principal payments under the same credit facility during the first half of 2016.
As previously announced, HMM, the charterer of five of the Partnership's vessels, namely Hyundai Prestige, Hyundai Premium, Hyundai Paramount, Hyundai Privilege and Hyundai Platinum (the "HMM Vessels"), each under time charters expiring in 2024 or 2025, has experienced financial difficulties and has pursued a restructuring involving various creditors and vessel owners.
As part of the various agreements that HMM reached with its creditors and vessel owners under its voluntary debt restructuring, the owning companies of the HMM Vessels entered into a charter restructuring agreement on July 15, 2016. This agreement provides for a 20% reduction in the charter rate payable under the respective charter parties, from $29,350 (gross per day) to $23,480 (gross per day), from July 18, 2016 to December 31, 2019 (the "Charter Reduction Period"). The total charter rate reduction for the Charter Reduction Period for the HMM Vessels is approximately $37.0 million (the "Charter Reduction Amount"). The charter restructuring agreement further provides that at the end of the Charter Reduction Period, the charter rate under the charters will be restored to the original daily rate of $29,350 until the expiry of such charters in 2024 or 2025.
In exchange for the Charter Reduction Amount, the Partnership will receive 4.4 million common shares in HMM that are expected to be freely tradable on the Stock Market Division of the Korean Exchange (at a share price reflecting a discount and subject to a floor under a pre-agreed formula), in an aggregate amount initially equal to the Charter Reduction Amount.
The M/T 'Miltiadis M II' (162,397 dwt, Ice Class 1A Crude/Product Tanker built 2006, Daewoo Shipbuilding & Marine Engineering Co., Ltd. South Korea) has been chartered to Capital Maritime & Trading Corp. ("Capital Maritime" or our "Sponsor") for a period of ten to twelve months at a gross daily rate of $25,000. The new charter is expected to commence in August 2016 after the completion of its special survey. The earliest redelivery under the new charter is in June 2017. The vessel was previously employed under a seven-month time charter to Capital Maritime at a gross daily rate of $35,000.
The M/T 'Amore Mio II' (159,982 dwt, Crude Oil Tanker built 2001, Daewoo Shipbuilding & Marine Engineering Co., Ltd., South Korea) has also been chartered to our Sponsor for a period of ten to twelve months at a gross daily rate of $21,000. The vessel is currently undergoing its scheduled dry-docking. The new charter is expected to commence in late August or early September 2016. The M/T 'Amore Mio II' was previously employed under an eight-month time charter to Shell International Trading & Shipping Company Ltd. at a gross daily rate of $33,750.
The M/T 'Agisilaos' (36,760 dwt, Ice Class 1A IMO II/III Chemical/ Product Tanker built 2006, Hyundai Mipo Dockyard Ltd., South Korea), previously employed with Capital Maritime, has replaced the M/T 'Arionas' (36,725 dwt, Ice Class 1A IMO II/III Chemical/ Product Tanker, built 2006, Hyundai Mipo Dockyard, South Korea) under the charter to Flota Petrolera Ecuatoriana ("Flopec") at a gross daily rate of $19,000, as the M/T 'Arionas' is expected to undergo its scheduled special survey. The M/T 'Agisilaos' was previously employed with CMTC at a gross daily rate of $14,500 with earliest charter expiration in August 2016.
The early termination of the CMTC charter of the M/T 'Agisilaos', in order for the vessel to replace M/T 'Arionas' and the new charters of M/T 'Amore Mio II' and M/T 'Miltiadis M II' were unanimously approved by the Conflicts Committee of the Partnership.
As a result of the above new charters, the Partnership's charter coverage for 2016 and 2017 has increased to 94% and 75%, respectively.