GlobeNewswire Inc | Jan 29, 2021 07:00AM EST

January 29, 2021

ATHENS, Greece, Jan. 29, 2021 (GLOBE NEWSWIRE) -- Capital Product Partners L.P. (the Partnership, CPLP or we / us) (NASDAQ: CPLP), an international owner of ocean-going vessels, today released its financial results for the fourth quarter ended December 31, 2020.

Highlights

Three-month periods ended December 31 2020 2019 Increase Revenues $35.1 $27.7 27% million millionExpenses $24.6 $18.2 35% million millionNet Income from continuing operations $7.3 $5.8 26% million millionNet Income per common unit from continuing $0.38 $0.31 23% operations

-- Agreed to acquire three 5,100 TEU container vessels with five year employment for a total consideration of $40.5 million. -- Operating Surplus1 and Operating Surplus after the quarterly allocation to the capital reserve for the fourth quarter of 2020 was $20.7 million and $11.4 million respectively. -- Announced common unit distribution of $0.10 for the fourth quarter of 2020. -- Announced an up to $30 million common unit repurchase program.

____________________1 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. Please refer to Appendix A at the end of the press release for a reconciliation of this non-GAAP measure with net income.

COVID-19

We continue to monitor the impact of COVID-19 on the Partnerships financial condition and operations and on the container industry in general (see also Market Commentary Update below). The various travel restrictions, health protocols and changing quarantine regimes in the countries in which we operate have so far translated into, among other things, increased costs and off hire related to crewing, crew rotation and crew related expenses, in addition to higher forwarding expenses and longer lead times to delivery, as well as increased dry docking duration and costs.

The actual impact of the COVID-19 pandemic in the longer run, as well as the efficacy of any measures we take in response to the challenges presented, as described in our previous releases, will depend on how the pandemic will continue to develop, the duration and extent of the restrictive measures that are associated with the pandemic and their further impact on global economy and trade.

Management Commentary

Mr. Jerry Kalogiratos, Chief Executive Officer of our General Partner, commented:

We are pleased to announce the addition of three Panamax container vessels to our fleet, as we continue to execute our business plan of growing the Partnership through accretive acquisitions with long term cash flow visibility. This transaction will be completed with a minimal cash outlay from the Partnership in view of the advantageous debt and Sellers Credit arrangements we have obtained. The low acquisition price, the five year charter in place to a reputable charterer, as well as the high residual value of these vessels imply very favorable returns on equity deployed.

In view of the positive market developments in the container charter market, we are focused on increasing cash flow visibility and charter coverage for the Partnerships vessels that come off charter, while we pursue further accretive acquisitions on the back of our increasing liquidity position. Finally, the unit repurchase program we have announced today in addition to our common unit distribution policy will allow us to balance growth going forward with returning capital to our unitholders.

Financial Summary

As previously announced, the share-for-share transaction with DSS Holdings L.P. (the DSS Transaction), involving an aggregate repayment of debt in a principal amount of $146.5 million, the full redemption and retirement of our Class B Convertible Preferred Units at par value and the spin-off of our 25 crude and product tankers (the Tanker Business), was completed on March 27, 2019. Accordingly, we present our financial results for comparative periods, on a continuing operations basis, except where reference is made to discontinued operations.

Overview of Fourth Quarter 2020 Results

Net income from continuing operations for the quarter ended December 31, 2020 was $7.3 million, compared with net income from continuing operations of $5.8 million for the fourth quarter of 2019. After taking into account the interest attributable to the general partner, net income from continuing operations per common unit for the quarter ended December 31, 2020 was $0.38, compared to net income from continuing operations per common unit of $0.31 for the fourth quarter of 2019.

Total revenue was $35.1 million for the quarter ended December 31, 2020, compared to $27.7 million during the fourth quarter of 2019. The increase in revenue was primarily attributable to the increase in the size of our fleet following the acquisition of three 10,000 TEU containers in January 2020, partly set off by the decrease in the average daily charter rate earned by the vessels in our fleet as well as the off-hire associated with passing special survey for the M/V Cape Agamemnon and with one of our 5,000 TEU vessels that had to remain off-hire for an extended period due to a covid-19 incident and the associated quarantine rules.

Total expenses for the quarter ended December 31, 2020 were $24.6 million, compared to $18.2 million in the fourth quarter of 2019. Voyage expenses for the quarter ended December 31, 2020 increased to $1.9 million, compared to $1.1 million in the fourth quarter of 2019, as one of the vessels in our fleet was employed under a voyage charter compared to none during the respective period in 2019. Total vessel operating expenses during the fourth quarter of 2020 amounted to $10.3 million, compared to $7.7 million during the fourth quarter of 2019. The increase in operating expenses was mainly due to the increase in the size of our fleet following the acquisition of the three 10,000 TEU container vessels in January 2020. Total expenses for the fourth quarter of 2020 also include vessel depreciation and amortization of $10.7 million, compared to $7.5 million in the fourth quarter of 2019. The increase in depreciation and amortization during the fourth quarter of 2020 was mainly attributable to the increase in the size of our fleet, the completion of the special surveys of nine of our vessels and the installation of scrubber systems in seven of our vessels during the second half of 2019 and the full year of 2020. General and administrative expenses for the fourth quarter of 2020 amounted to $1.8 million as compared to $2.0 million in the fourth quarter of 2019.

Total other expense, net for the quarter ended December 31, 2020 was $3.2 million compared to $3.7 million for the fourth quarter of 2019. Total other expense, net includes interest expense and finance costs of $3.4 million for the fourth quarter of 2020, as compared to $3.9 million for the fourth quarter of 2019. The decrease in interest expense and finance costs was mainly attributable to the decrease in the LIBOR weighted average interest rate compared to the fourth quarter of 2019 partly offset by the increase in the average long-term debt outstanding during the period.

Capitalization of the Partnership

As of December 31, 2020, total cash amounted to $54.3 million. Total cash includes restricted cash of $7.0 million which represents the minimum liquidity requirement under our financing arrangements.

As of December 31, 2020, total partners capital amounted to $422.1 million, an increase of $15.3 million compared to $406.7 million as of December 31, 2019. The increase reflects net income for the year ended December 31, 2020 and the amortization associated with the equity incentive plan, partly offset by distributions declared and paid during the period in the total amount of $17.1 million.

As of December 31, 2020, the Partnerships total debt was $379.7 million, reflecting an increase of $117.3 million compared to $262.4 million as of December 31, 2019. The increase is attributable to the term loan entered into with Hamburg Commercial Bank A.G. and the sale and lease back transaction entered into with CMB Financial Leasing Co., Ltd in connection with the acquisition of three 10,000 TEU containers in January 2020 and the refinancing of three 9,000 TEU Container vessels which was completed in May 2020, partially offset by scheduled principal payments during the period.

Operating Surplus

Operating surplus from continuing operations for the quarter ended December 31, 2020 amounted to $20.7 million, compared to $21.0 million for the previous quarter ended September 30, 2020 and $15.0 million for the fourth quarter of 2019. We allocated $9.3 million to the capital reserve for the fourth quarter of 2020, in line with the previous quarter. Operating surplus for the quarter ended December 31, 2020, after the quarterly allocation to the capital reserve was $11.4 million.

Acquisition of Three 5,100 TEU Container Vessels

On January 27, 2021, the Partnership agreed to acquire from Capital Maritime & Trading Corp. (Capital Maritime) three 5,100 TEU sister container vessels, namely the M/V Seattle Express, M/V Long Beach Express and M/V Fos Express, all built in 2008 at Hanjin Heavy Industries S. Korea, for a total consideration of $40.5 million. The vessels are employed under five year charters to Hapag-Lloyd at a gross charter rate of $12,300 per day and will be delivered to the Partnership with their special surveys passed and fitted with ballast water treatment and alternative maritime power (AMP) systems.

The Partnership will partly fund the acquisition of the three vessels by entering into a sale and lease back transaction with CMB Financial Leasing Co., Ltd, (CMBFL) for an amount of $30.0 million in aggregate. The lease has a duration of five years and will be repaid in 20 equal consecutive quarterly installments of $0.8 million including a purchase option for the Partnership to acquire each vessel on expiration of the lease at the predetermined price of $4.5 million. In addition, the Partnership has various purchase options commencing from the first year anniversary of the lease. The sale and lease back arrangement bears interest at a rate of LIBOR plus 2.85%.

Furthermore, the Partnership entered into a sellers credit agreement with Capital Maritime to defer $6.0 million of the purchase price for up to five years from the delivery of the vessels (the Sellers Credit). The Sellers Credit bears interest at a fixed rate of 5.0% per year.

The acquisition and the Sellers Credit agreement were entered into on an arms length basis and were reviewed and unanimously approved by the conflicts committee of the Board of Directors (the Committee) and the entire Board of Directors. Fearnleys Securities served as financial advisor and Fried, Frank, Harris, Shriver & Jacobson LLP served as legal advisors to the Committee.

As a result of the acquisition, the Partnerships charter coverage for 2021 and 2022 amounts to 90% and 81%, respectively, while the remaining charter duration corresponds to 4.2 years.

Unit Repurchase Program

On January 25, 2021, the Partnerships Board of Directors approved a unit repurchase program, providing the Partnership with authorization to repurchase up to $30.0 million of units of the Partnerships common unit, effective for a period of two years. The Partnership may repurchase these units in the open market or in privately negotiated transactions, at times and prices that are considered to be appropriate by the Partnership.

Quarterly Common Unit Cash Distribution

On January 21, 2021, the Board of Directors of the Partnership (the Board) declared a cash distribution of $0.10 per common unit for the fourth quarter of 2020 payable on February 10, 2021 to common unit holders of record on February 2, 2021.

Market Commentary Update

Following a sharp decline in charter rates during the second quarter of 2020, the charter market experienced a strong rebound across all sizes during the third quarter, which accelerated further during the fourth quarter, as the supply of vessels became increasingly restricted, while demand for container vessels continued to increase. The increased demand was driven by faster than expected economic recovery, inventory re-stocking and change in consumer behavior with the transpacific trade benefitting especially from these trends. The supply of vessels was affected by increasing disruptions in the supply chain mostly due to covid-19 restrictions, as well as port congestion.

Analysts now expect container vessel demand contraction for the full year of 2020 at -1.1% compared to the initial estimate of -4.1% in previous quarter, while demand growth for 2021 is expected at 5.7%. As a result of the firming chartering market, the container vessel orderbook has seen an increase from historical lows and currently stands at 10.8% of current fleet TEU capacity. As of quarter end, slippage including cancellations of newbuilding container vessels stood at 25.0% in TEU compared to 29% at the end of the third quarter of 2020. Supply growth for 2021 is estimated at 3.8% compared to FY 2020 estimate of 2.9%.

Conference Call and Webcast

Today, January 29, 2021, the Partnership will host an interactive conference call at 9:00 am Eastern Time to discuss the financial results.

Conference Call Details

Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1(877)-553-9962 (U.S. Toll Free Dial In), 0(808)238-0669 (UK Toll Free Dial In) or +44 (0)2071 928592 (Standard International Dial In). Please quote Capital Product Partners.

A replay of the conference call will be available until Friday, February 5, 2021 by dialing 1 866 331 -1332 (U.S. Toll Free Dial In), 0 (808) 238-0667 (UK Toll Free Dial In) or +44 (0) 3333 009785 (Standard International Dial In). Access Code: 69648481#.

Slides and Audio Webcast

There will also be a simultaneous live webcast over the Internet, through the Capital Product Partners website, www.capitalpplp.com. Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.

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 14 vessels, including 13 Neo-Panamax container vessels and one Capesize bulk carrier.

For more information about the Partnership, please visit:www.capitalpplp.com.

Forward-Looking Statements

The statements in this press release that are not historical facts, including, among other things, the expected financial performance of CPLPs business, CPLPs ability to pursue growth opportunities, CPLPs expectations or objectives regarding future distributions, market and charter rate expectations, and, in particular, the effects of COVID-19 on financial condition and operations of CPLP and the container industry in general, are forward-looking statements (as such term is defined in Section21E 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. For a discussion of factors that could materially affect the outcome of forward-looking statements and other risks and uncertainties, see Risk Factors in CPLPs annual report filed with the SEC on Form 20-F. Unless required by law, CPLP expressly disclaims any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in its views or expectations, to conform them to actual results or otherwise. CPLP does not assume any responsibility for the accuracy and completeness of the forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements.

CPLP-F

Contact Details:

Capital GP L.L.C.Jerry KalogiratosCEOTel. +30 (210) 4584 950 E-mail: j.kalogiratos@capitalpplp.com

Capital GP L.L.C.Nikos KalapotharakosCFOTel. +30 (210) 4584 950 E-mail: n.kalapotharakos@capitalmaritime.com

Investor Relations / MediaNicolas BornozisCapital Link, Inc. (New York)Tel. +1-212-661-7566E-mail: cplp@capitallink.comSource: Capital Product Partners L.P.

Capital Product Partners L.P.Unaudited Condensed Consolidated Statements of Comprehensive Income / (Loss)(In thousands of United States Dollars, except for number of units and earningsper unit) For the three - month For the years periods ended December 31, ended December 31, 2020 2019 2020 2019 Revenues 35,085 27,701 140,865 108,374 Total revenues 35,085 27,701 140,865 108,374 Expenses: Voyage expenses 1,863 1,078 6,301 2,930 Vessel operating expenses 9,030 6,703 33,745 26,632 Vessel operating expenses - 1,268 995 4,976 3,917 related partiesGeneral and administrative 1,753 2,016 7,195 5,502 expensesVessel depreciation and 10,678 7,450 41,405 29,261 amortizationOperating income 10,493 9,459 47,243 40,132 Other income / (expense), net:Interest expense and (3,358 ) (3,865 ) (16,741 ) (17,036 )finance costOther income / (expense) 133 202 (135 ) 1,325 Total other expense, net (3,225 ) (3,663 ) (16,876 ) (15,711 )Partnership?s net income 7,268 5,796 30,367 24,421 from continuing operationsPreferred unit holders?interest in Partnership?s - - - 2,652 net income from continuingoperationsDeemed dividend to - - - 9,119 preferred unit holders?General Partner?s interestin Partnership?s net income 134 107 558 236 from continuing operationsCommon unit holders?interest in Partnership?s 7,134 5,689 29,809 12,414 net income from continuingoperationsPartnership?s net loss from - (172 ) - (146,876 )discontinued operationsPartnership?s net income / 7,268 5,624 30,367 (122,455 )(loss)Net income from continuing operations per:Common unit, basic and 0.38 0.31 1.60 0.68 dilutedWeighted-average units outstanding:Common units, basic and 18,194,316 18,178,274 18,194,186 18,178,144 dilutedNet loss from discontinued operations per:Common unit, basic and - (0.01 ) - (7.93 )dilutedWeighted-average units outstanding:Common units, basic and 18,194,316 18,178,274 18,194,186 18,178,144 dilutedNet income / (loss) from operations per:Common unit, basic and 0.38 0.30 1.60 (7.25 )dilutedWeighted-average units outstanding:Common units, basic and 18,194,316 18,178,274 18,194,186 18,178,144 diluted

Capital Product Partners L.P.Unaudited Condensed Consolidated Balance Sheets(In thousands of United States Dollars)

Assets Current assets As of December 31, As of December 31, 2020 2019Cash and cash equivalents 47,336 57,964Trade accounts receivable, net 2,855 2,690Prepayments and other assets 3,314 2,736Inventories 3,528 1,471Claims 746 1,085Total current assets 57,779 65,946Fixed assets Vessels, net 712,197 576,891Total fixed assets 712,197 576,891Other non-current assets Above market acquired charters 34,579 46,275Deferred charges, net 6,001 3,563Restricted cash 7,000 5,500Prepayments and other assets 4,642 5,287Total non-current assets 764,419 637,516Total assets 822,198 703,462Liabilities and Partners? Capital Current liabilities Current portion of long-term debt, net 35,810 26,997Trade accounts payable 9,029 12,501Due to related parties 3,257 5,256Accrued liabilities 10,689 16,156Deferred revenue, current 2,821 3,826Total current liabilities 61,606 64,736Long-term liabilities Long-term debt, net 338,514 231,989Total long-term liabilities 338,514 231,989Total liabilities 400,120 296,725Commitments and contingencies Total partners? capital 422,078 406,737Total liabilities and partners? capital 822,198 703,462

Capital Product Partners L.P.Unaudited Condensed Consolidated Statements of Cash Flows(In thousands of United States Dollars) Fortheyears endedDecember 31, 2020 2019 Cash flows from operating activities of continuing operations:Net income from continuing operations 30,367 24,421 Adjustments to reconcile net income to netcash provided by operating activities of continuing operations:Vessel depreciation and amortization 41,405 29,261 Amortization and write off of deferred 3,047 1,096 financing costsAmortization of above market acquired charters 11,696 14,380 Equity compensation expense 2,049 907 Changes in operating assets and liabilities: - Trade accounts receivable, net (165 ) 13,436 Prepayments and other assets (1,384 ) (1,195 )Inventories (2,057 ) 45 Claims 339 (1,085 )Trade accounts payable 3,779 (9,406 )Due to related parties (1,999 ) (12,486 )Accrued liabilities 684 (9,558 )Deferred revenue (1,005 ) (3,585 )Dry-docking costs paid (6,074 ) (954 )Net cash provided by operating activities of 80,682 45,277 continuing operationsCash flows from investing activities of continuing operations:Vessel acquisitions and improvements (185,247 ) (6,519 )Net cash used in investing activities of (185,247 ) (6,519 )continuing operationsCash flows from financing activities of continuing operations:Proceeds from long term debt 270,850 - Deferred financing costs paid (4,765 ) (788 )Payments of long-term debt (153,573 ) (32,733 )Redemption of Class B unit holders - (116,850 )Dividends paid (17,075 ) (28,771 )Net cash provided by / (used in) financing 95,437 (179,142 )activities of continuing operationsNet decrease in cash, cash equivalents and (9,128 ) (140,384 )restricted cash from continuing operationsCash flows from discontinued operations Operating activities - 8,905 Investing activities - (1,484 )Financing activities - 158,228 Net increase in cash, cash equivalents and - 165,649 restricted cash from discontinued operationsNet (decrease) / increase in cash, cash (9,128 ) 25,265 equivalents and restricted cashCash, cash equivalents and restricted cash at 63,464 38,199 beginning of the yearCash, cash equivalents and restricted cash at 54,336 63,464 end of the yearSupplemental cash flow information Cash paid for interest 15,347 20,138 Non-Cash Investing and Financing Activities Capital expenditures included in liabilities 2,507 15,004 Capitalized dry docking costs included in 1,649 2,560 liabilitiesDeferred financing costs included in 6 - liabilitiesReconciliation of cash, cash equivalents and restricted cashCash and cash equivalents 47,336 57,964 Restricted cash ? Non-current assets 7,000 5,500 Total cash, cash equivalents and restrictedcash shown in the statements of cash 54,336 63,464 flows

Appendix A Reconciliation of Non-GAAP Financial Measure (In thousands of U.S. dollars)Description of Non-GAAP Financial Measure Operating SurplusOperating Surplus represents net income adjusted for depreciation and amortization expense, 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 partnerships financial performance and ability to make quarterly cash distributions. Operating Surplus is not required by accounting principles generally accepted in the United States (GAAP) and should not be considered a substitute for net income, cash flow from operating activities and other operations or cash flow statement data prepared in accordance with GAAP or as a measure of profitability or liquidity. Our calculation of Operating Surplus may not be comparable to that reported by other companies. The table below reconciles Operating Surplus to net income for the following periods:

For the For the For the three-month three-month three-monthReconciliation of Non-GAAP Financial period period periodMeasure ? Operating Surplus ended ended ended December September December 31, 2020 30, 2020 31, 2019Partnership?s net income from continuing 7,268 7,769 5,796operationsAdjustments to reconcile net income to operating surplus prior to Capital ReserveDepreciation and amortization^1 11,560 11,513 8,174Amortization of above market acquiredcharters and straight-line revenue 1,854 1,755 1,047adjustmentsOperating Surplus from continuing 20,682 21,037 15,017operationsAdd: Operating Surplus from discontinued - - 172operationsTotal Operating Surplus from operations 20,682 21,037 15,189Capital reserve (9,302) (9,302) (7,703)Operating Surplus after capital reserve 11,380 11,735 7,486Increase in recommended reserves (9,483) (9,838) (846)Available Cash 1,897 1,897 6,640

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1Depreciation and amortization line item includes the following components:

-- Vessel depreciation and amortization; and -- Deferred financing costs and equity compensation plan amortization.