GlobeNewswire Inc | Nov 2, 2020 07:00AM EST

November 02, 2020

ATHENS, Greece, Nov. 02, 2020 (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 third quarter ended September 30, 2020.

Highlights

Three-month periods ended September 30, 2020 2020 2019 IncreaseRevenue $35.5 million $26.4 million 34%Expenses $23.8 million $19.3 million 23%Net Income $7.8 million $3.4 million 131%Net Income per common unit $0.41 $0.18 128%

-- Operating Surplus1 and Operating Surplus after the quarterly allocation to the capital reserve for the third quarter of 2020 was $21.0 million and $11.7 million respectively. -- Announced common unit distribution of $0.10 for the third quarter of 2020.

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 below). 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:

As aforementioned in our previous earnings releases, the COVID-19 pandemic and its adverse impact on human life, economic activity and logistical chains is a unique and unprecedented event with continuously and rapidly changing effects across a number of fronts. In this environment, we continue to prioritize the health and safety of our crews, as well as our onshore employees by designing and implementing together with our managers comprehensive measures and policies.

In view of this environment, we are pleased to have delivered on a strong quarterly performance compared to the same period of last year and to see charter rates for neo panamax vessels rebound from the lows experienced in the previous quarter. We have taken advantage of the rising rate environment to secure employment for one of our vessels and to further diversify our customer base.

Despite the rising rate environment, we note the increasing uncertainty around the adverse effects of the pandemic over the winter months and as such we remain cautious with regard to the medium to long term economic outlook. We intend to continue to deliver on our business model by securing longer term employment visibility for our vessels that come off charter and stagger charter expirations to mitigate re-chartering risk. As we secure increasing cash flow visibility and charter coverage, we intend to pursue accretive acquisitions on the back of our increasing liquidity position, while our board continues to assess our capital allocation strategy with a view to balancing growth 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 Third Quarter 2020 Results

Net income from continuing operations for the quarter ended September 30, 2020 was $7.8 million, compared with net income from continuing operations of $3.4 million for the third 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 September 30, 2020 was $0.41, compared to net income from continuing operations per common unit of $0.18 for the third quarter of 2019.

Total revenue was $35.5 million for the quarter ended September 30, 2020, compared to $26.4 million during the third 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.

Total expenses for the quarter ended September 30, 2020 were $23.8 million, compared to $19.3 million in the third quarter of 2019. Voyage expenses for the quarter ended September 30, 2020 increased to $1.9 million, compared to $0.7 million in the third 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 third quarter of 2020 amounted to $9.5 million, compared to $9.8 million during the third quarter of 2019. The decrease in operating expenses was mainly due to expenses incurred during the third quarter of 2019 in connection with the passing of the special survey of the M/V Agamemnon partly offset in the third quarter of 2020, by 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 third quarter of 2020 also include vessel depreciation and amortization of $10.6 million, compared to $7.3 million in the third quarter of 2019. The increase in depreciation and amortization during the third quarter of 2020 was mainly attributable to the increase in the size of our fleet, the completion of the special surveys of eight of our vessels and the installation of scrubber systems in seven of our vessels during the second half of 2019 and the first half of 2020. General and administrative expenses for the third quarter of 2020 amounted to $1.8 million as compared to $1.5 million in the third quarter of 2019.

Total other expense, net for the quarter ended September 30, 2020 was $3.9 million compared to $3.7 million for the third quarter of 2019. Total other expense, net includes interest expense and finance costs of $3.5 million for the third quarter of 2020, as compared to $4.1 million in the third 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 third quarter of 2019 partly offset by the increase in the average long-term debt outstanding during the period.

Capitalization of the Partnership

As of September 30, 2020, total cash amounted to $47.7 million. Total cash includes restricted cash of $14.9 million in total representing the $7.0 million minimum liquidity requirement under our financing arrangements and the $7.9 million pledged to ICBC Financial Leasing Co. Ltd, which is expected to be released during the fourth quarter of 2020, following the commencement of M/V Akadimos new employment.

As of September 30, 2020, total partners capital amounted to $416.2 million, an increase of $9.5 million compared to $406.7 million as of December 31, 2019. The increase reflects net income for the nine months ended September 30, 2020 and the amortization associated with the equity incentive plan, partly offset by distributions declared and paid during the first nine months of 2020 in the total amount of $15.2 million.

As of September 30, 2020, the Partnerships total debt was $389.0 million, reflecting an increase of $126.6 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., 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 September 30, 2020 amounted to $21.0 million, compared to $25.5 million for the previous quarter ended June 30, 2020 and $12.7 million for the third quarter of 2019. We allocated $9.3 million to the capital reserve for third quarter in 2020, in line with the previous quarter. Operating surplus for the quarter ended September 30, 2020, after the quarterly allocation to the capital reserve was $11.7 million. 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.

Fleet Employment Update

During the quarter, the Partnership secured employment for the M/V Adonis' (115,600 mt dwt / 9,288 TEU, Eco-Flex, Wide Beam Containership built 2015, Daewoo-Mangalia Heavy Industries S..) with Zim Integrated Shipping Services Ltd. for a period of 12 to 14 months at $33,500 gross per day. The charter commenced in late September 2020.

As a result, the Partnerships charter coverage for the remainder of 2020 and for 2021 has increased to 91% and 86%, respectively while the remaining charter duration amounts to 4.5 years.

Quarterly Common Unit Cash Distribution

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

Market Commentary Update

Overall, the container charter market experienced a strong rebound across all sizes during the third quarter of 2020. The operators stringent capacity management coupled with lower bunker prices have lifted liner profitability at or close to historical highs. As a result of this and the recovery in consumer demand, available tonnage in the market has been picked up by liner companies at increasing rates with the container idle fleet decreasing from 11.0% in May to less than 4.0% by the end of the third quarter 2020.

Analysts now expect demand contraction for the full year of 2020 at -4.1% in terms of demand for container vessels compared to the initial estimate of more than -10.0%. On the other hand, the expected recovery rate for 2021 has been revised downwards from 9.3% to 5.7%.

As the economic outlook, future developments with regard to the COVID-19 pandemic and the overall prospects for global containerized trade continue to remain uncertain, liner companies have to a large extent avoided committing to longer term charters. However, as charter rates increase, we expect to see an increase in the average duration of new charters with the aim of containing the rate of increase of charter rates going forward.

The container orderbook is estimated to be at historical lows and now stands at 303 units of 1.87 million TEU and 8.0% of the total worldwide container fleet. As of quarter end, slippage including cancellations of newbuilding container vessels stood at 29.0% in TEU compared to none at the end of the third quarter of 2019. Supply growth for 2020 has thus been revised downward to 1.8% from 3.1% at the beginning of the year.

Conference Call and Webcast

Today, November 2, 2020, 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 Monday, November 9, 2020 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 thirteen 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 earnings per unit)

For the three - month For the nine - month periods ended September periods 30, ended September 30, 2020 2019 2020 2019 Revenues 35,523 26,439 105,780 80,673 Total revenues 35,523 26,439 105,780 80,673 Expenses: Voyage expenses 1,919 726 4,438 1,852 Vessel operating expenses 8,192 8,790 24,715 19,929 Vessel operating expenses - 1,267 994 3,708 2,922 related partiesGeneral and administrative 1,835 1,499 5,442 3,486 expensesVessel depreciation and 10,625 7,336 30,727 21,811 amortizationOperating income 11,685 7,094 36,750 30,673 Other income / (expense), net:Interest expense and (3,536 ) (4,137 ) (13,383 ) (13,171 )finance costOther (expense) / income (380 ) 403 (268 ) 1,123 Total other expense, net (3,916 ) (3,734 ) (13,651 ) (12,048 )Partnership?s net income 7,769 3,360 23,099 18,625 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 142 63 424 129 from continuing operationsCommon unit holders?interest in Partnership?s 7,627 3,297 22,675 6,725 net income from continuingoperationsPartnership?s net income /(loss) from discontinued - 34 - (146,704 )operationsPartnership?s net income / 7,769 3,394 23,099 (128,079 )(loss)Net income from continuing operations per:Common unit, basic and 0.41 0.18 1.22 0.37 dilutedWeighted-average units outstanding:Common units, basic and 18,194,142 18,178,100 18,194,142 18,178,100 dilutedNet loss from discontinued operations per:Common unit, basic and - - - (7.92 )dilutedWeighted-average units outstanding:Common units, basic and 18,194,142 18,178,100 18,194,142 18,178,100 dilutedNet income / (loss) from operations per:Common unit, basic and 0.41 0.18 1.22 (7.55 )dilutedWeighted-average units outstanding:Common units, basic and 18,194,142 18,178,100 18,194,142 18,178,100 diluted



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

Assets As of September 30, As of DecemberCurrent assets 2020 31, 2019Cash and cash equivalents 32,811 57,964Restricted cash 7,900 -Trade accounts receivable, net 3,013 2,690Prepayments and other assets 3,170 2,736Inventories 2,854 1,471Claims 559 1,085Total current assets 50,307 65,946Fixed assets Vessels, net 720,672 576,891Total fixed assets 720,672 576,891Other non-current assets Above market acquired charters 36,854 46,275Deferred charges, net 5,570 3,563Restricted cash 7,000 5,500Prepayments and other assets 4,887 5,287Total non-current assets 774,983 637,516Total assets 825,290 703,462Liabilities and Partners? Capital Current liabilities Current portion of long-term debt, 35,786 26,997netTrade accounts payable 9,917 12,501Due to related parties 4,835 5,256Accrued liabilities 10,050 16,156Deferred revenue, current 1,032 3,826Total current liabilities 61,620 64,736Long-term liabilities Long-term debt, net 347,478 231,989Total long-term liabilities 347,478 231,989Total liabilities 409,098 296,725Commitments and contingencies Total partners? capital 416,192 406,737Total liabilities and partners? 825,290 703,462capital

Capital Product Partners L.P.Unaudited Condensed Consolidated Statements of Cash Flows(In thousands of United States Dollars)

Forthenine-month periodsendedSeptember30, 2020 2019 Cash flows from operating activities of continuing operations:Net income from continuing operations 23,099 18,625 Adjustments to reconcile net income to net cashprovided by operating activities of continuing operations:Vessel depreciation and amortization 30,727 21,811 Amortization and write off of deferred 2,680 822 financing costsAmortization of above market acquired charters 9,421 10,755 Equity compensation expense 1,534 462 Changes in operating assets and liabilities: - - Trade accounts receivable, net (323 ) 11,029 Prepayments and other assets 560 (1,040 )Claims 526 - Inventories (1,383 ) 171 Trade accounts payable 4,591 (7,385 )Due to related parties (421 ) (13,786 )Accrued liabilities 803 (7,426 )Deferred revenue (2,794 ) (5,746 )Dry-docking costs paid (4,882 ) - Net cash provided by operating activities of 64,138 28,292 continuing operationsCash flows from investing activities of continuing operations:Vessel acquisitions and improvements (186,575 ) (2,543 )Net cash used in investing activities of (186,575 ) (2,543 )continuing operationsCash flows from financing activities of continuing operations:Proceeds from long term debt 270,850 - Deferred financing costs paid (4,718 ) (770 )Payments of long-term debt (144,270 ) (25,030 )Redemption of Class B unit holders - (116,850 )Dividends paid (15,178 ) (22,935 )Net cash provided by / (used in) financing 106,684 (165,585 )activities of continuing operationsNet decrease in cash, cash equivalents and (15,753 ) (139,836 )restricted cash from continuing operationsCash flows from discontinued operations Operating activities - 9,081 Investing activities - (1,484 )Financing activities - 158,228 Net increase in cash, cash equivalents and - 165,825 restricted cash from discontinued operationsNet (decrease) / increase in cash, cash (15,753 ) 25,989 equivalents and restricted cashCash, cash equivalents and restricted cash at 63,464 38,199 beginning of periodCash, cash equivalents and restricted cash at 47,711 64,188 end of periodSupplemental cash flow information Cash paid for interest 12,328 16,356 Non-Cash Investing and Financing Activities Capital expenditures included in liabilities 1,790 3,863 Capitalized dry docking costs included in 1,641 995 liabilitiesDeferred financing costs included in liabilities 49 - Reconciliation of cash, cash equivalents and restricted cashCash and cash equivalents 32,811 58,688 Restricted cash -current assets 7,900 - Restricted cash - non-current assets 7,000 5,500 Total cash, cash equivalents and restricted cash 47,711 64,188 shown in the statements of cash 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 period endedMeasure ? Operating Surplus ended ended September June 30, September 30, 2020 2020 30, 2019Partnership?s net income from continuing 7,769 8,656 3,360 operationsAdjustments to reconcile net income to operating surplus prior to Capital ReserveDepreciation and amortization^1 11,513 12,930 8,074 Amortization of above market acquiredcharters and straight-line revenue 1,755 3,919 1,270 adjustmentsOperating Surplus from continuing 21,037 25,505 12,704 operationsAdd: Operating Surplus from discontinued - - 34 operationsTotal Operating Surplus from operations 21,037 25,505 12,738 Capital reserve (9,302 ) (9,302 ) (7,703 )Operating Surplus after capital reserve 11,735 16,203 5,035 (Increase) / decrease in recommended (9,838 ) (14,306 ) 801 reservesAvailable Cash 1,897 1,897 5,836

1Depreciation and amortization line item includes the following components:

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