Capital Product Partners L.P. (CPLP)
Q2 2012 Earnings Call
July 31, 2012 10:00 AM ET
Ioannis Lazaridis – CEO and CFO
Jerry Kalogiratos – Finance Director, Capital Maritime
Josh – Deutsche Bank
Jon Chappell – Evercore Partners
Michael Webber – Wells Fargo
Paul Jacob – Raymond James
Wilson – Bank of America Merrill Lynch
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Thank you for standing by and welcome to the Capital Product Partners Second Quarter 2012 Financial Results conference call. We have with us Mr. Ioannis Lazaridis, Chief Executive Officer and Chief Financial Officer of the partnership, and Mr. Jerry Kalogiratos, Finance Director of Capital Maritime.
At this time, all participants are in a listen-only mode. There will be a presentation followed by question-and-answer session. (Operator Instructions). I’m to remind you this conference is being recorded today, Tuesday, July 31, 2012.
Statements in today’s conference call that are not historical facts, including our expectations regarding developments in the markets, our expected charter coverage ratio for 2012 and expectations regarding our quarterly distribution may be forward-looking statements as such is defined in Section 21E 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. Unless required by law, we expressly disclaim any obligation to update or revise any of these forward-looking statements whether because of future events, new information, a change in our views or expectations to conform to actual results or otherwise.
We assume no responsibility for the accuracy and completeness of the forward-looking statements. We make no prediction or statements about the performance of our common units.
I would now turn the – hand over to your speaker today, Mr. Lazaridis. Please go ahead, sir.
Thank you, (Scott). Thank you all for joining us today. As a reminder, we will be referring to supporting slides available on our website as we go through today’s presentation.
Starting with Slide 1, I’m going to make some comparisons on today’s call between the second quarter of 2012 and the second quarter of 2011 as this is the most meaningful analogy in our business.
On July 23, 2012, our board of director declared a cost distribution of $0.2325 per common unit for the second quarter of 2012 in line with management’s annual distribution guidance.
The second quarter common unit cash distribution will be paid on August 15, 2012 to unit holders of record on August 7, 2012.
The partnership’s operating surplus for the quarter amounted to $16.9 million or $12.7 million adjusted for the payment of distributions to the Class B unit holders following the issuance of 15,555,554 Class B convertible preferred units during the second quarter.
Revenues for the second quarter include $1.1 million in profit sharing revenues generated primarily by three of our crude vessels as a good spot tanker market rebounded during the first half of the year.
The profit sharing arrangements in the charters of a number of our good vessels allow us to share the success of the base rate, on a 50/50 basis with our charters and are settled biannually.
I would also like to remind you that on May 14, 2012, we announced a very important transaction for the partnership as we agreed to issue $140 million of Class B units to a group of investors, including Kayne Anderson Capital Advisors, (Strong) Capital LLC, (inaudible) Partner, and the partnership sponsor, Capital Maritime.
The Class B units were apprised at $9 per unit and are convertible at any time into common units of the partnership on a one-for-one basis.
The purchase price represented a 9.7% premium to the trailing 30-day volume weighted average price of the common units on the day of the announcement.
The Class B units pay is quarterly distributions of $0.21375 per unit, representing an annualized distribution of 9.5%, except for the period from May 22, 2012 through June 30, 2012 where the payment is $0.26736 per unit.
The partners in the transaction cannot sell or transfer during 120-day lockup period. The board of directors for the partnership unanimously approved the terms of this transaction which was completed on May 23, 2012.
In connection with the issuance of the Class B units, the partnership executed amendments to its three credit facilities and prepaid debt of $149.6 million, also utilizing part of its cash balances.
We are also pleased to announce that the Multi Tanker Avax has extended its charter with us (and also) Capital Maritime by a period of 12 months at a gross rate of $14,000 per day.
The Multi Tanker Avax was – has also entered into a new charter with our sponsor Capital Maritime for a period of 12 months at the same rate. The Avax delivery for each of the Avax (inaudible) under these charters is expected to be April 2013 and May 2013 respectively.
Both transactions were unanimously approved by the conference committee of our board of directors.
As of the end of the first quarter, the average remaining charter duration of the partnership stands at 4.7 years with 87% of the remaining 2012 total free days having secured charter coverage.
Turning to Slide 2, total revenues for the quarter were $37.8 million compared with $27.9 million in the second quarter of 2011. The partnership’s revenues reflect increased fleet size following the acquisition of crude carriers in September 2011 and the $1.1 million in profit sharing generated by our charters in a number of our crude vessels.