Thank you for standing by, ladies and gentlemen, and welcome to the Costamare Inc. conference call on the first quarter 2020 financial results. We have with us Mr. Gregory Zikos, Chief Financial Officer of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session. At which time, if you wish to ask a question, please press star then one on your telephone keypad and wait for your name to be announced. I must advise you that this conference is being recorded today, Wednesday, April 29th, 2020. We would like to remind you that this conference call contains forward-looking statements. Please take a moment to read slide number two of the presentation, which contains the forward-looking statements. I will now pass the floor to your speaker today, Mr. Zikos. Please go ahead, sir.
Thank you. Good morning, ladies and gentlemen. COVID-19 presents the largest shock in the global economy since the 2008, 2009 crisis. The supply of containerized goods has experienced a rare episode of disruption, and the industry must now contend with the consequences of reduced demand. Determining the timing and shape of the recovery is a challenge, yet it is worth noting that the protective measures adopted across the world are intended to be temporary, and we believe that the restrictions en forced are also creating a deferred built-in demand. In this environment, the safety of our vessel crews, as well as of our onshore employees, remains our top priority. We have taken steps in order to protect our employees as well as to ensure uninterrupted service to our clients. For the first quarter, the company delivered profitable results. Liquidity increased to $268 million.
We have contracted revenues of $2.1 billion, continued access to commercial bank debt, a smooth debt repayment schedule, and minimal CapEx requirements. During the quarter, we chartered a total of 12 ships, including three 11,000 TEU vessels, which were chartered for periods ranging from one to three years. Finally, we recently declared our 38th dividend since going public. As has always been the case, but especially during today's unprecedented times, our top priority is to cover our downside. Building upon that, we will continue to monitor the market and assess new initiatives in order to bolster our balance sheet and liquidity position, while at the same time evaluating new opportunities in a volatile market environment. Moving now to the slides presentation. On slide three, you can see the highlights. Net income rose by approximately $35 million in Q1 compared to last year.
The adjusted EPS is $0.27, a 140% increase to Q1 2019. We do maintain a strong balance sheet with liquidity close to $270 million, leverage of approximately 40%, and no meaningful debt maturities over the next 12 months. Moving to slide four, w e have concluded three separate financings with European financial institutions for a total amount of $165 million, and maturities ranging from four to five years. Regarding operational performance, during the previous quarter, we achieved utilization rates of close to 100% and very competitive operating expenses of below $5,100 per day per vessel. Slide five, d uring Q1, in a volatile charter environment, we have chartered 12 vessels, including the three 11,000s chartered for periods ranging from one to three years. The containership market has been negatively affected by the COVID outbreak.
At the same time, the idle fleet, as does for vessels undergoing scrubber retrofit and blank sailings, owned by tonnage providers stands at 1.2%, while the order book has remained at levels close to 10% and is expected to remain low. We will pay our 38th consecutive quarterly dividend in February. Insiders have been participating in the DRIP, and since inception have reinvested in total $87 million. Moving to the next slide, you can see the first quarter 2020 results. During the first quarter of this year, the company generated revenues of $121 million and adjusted net income of $33 million. As of the above, the first quarter EPS comes at $0.27, more than double on a year-over-year basis. Our adjusted figures take into consideration the following non-cash items: accrued charter revenues, accounting gains or losses from asset disposals, and other non-cash charges.
On slide seven, we are discussing our capital structure. As already mentioned, there are no substantial balloon payments due over the next 12 months. Our leverage is comfortably below 50%. Net debt to 12-month trailing EBITDA is 3.4x , and EBITDA over net interest is at 4.9x when our financial covenants have a minimum requirement of at least 2.5x coverage. On slide eight, we are showing the revenue contribution for our fleet. 99% of our contracted charters come from first-class charters like Maersk, MSC, Evergreen, COSCO, Yang Ming, and Hapag-Lloyd. We have today $2.1 billion in contracted revenues, and the remaining time has a duration of about 3.4 years. On the last two slides, we are discussing the market. As shown on slide nine, charter rates have fallen in the first quarter as a result of reduced demand.
Initial blank sailings were followed by substantial capacity reductions in all major trades. Box rates have been under pressure for most of Q1. They stand, however, at levels close to those a year ago. Slide 10, t he active fleet is shown at 10.2%. However, the number of ships owned by tonnage providers that are today available for charter is only 1.2% of the total capacity. The order book is slightly higher than 10%, and it is expected to remain at low levels. As already mentioned, our main priority is to cover our downside risk, while at the same time looking for opportunities in such a volatile shipping environment. This concludes our presentation, and we can now take questions. Thank you. Operator, we can take questions now.
Thank you. As a reminder, if you would like to ask a question, please press star then one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press star then two. Again, that's star one to ask a question. Your first question comes from the line of Chris Wetherbee of Citi. Please go ahead.
Good morning. James on for Chris. I just wanted to touch on the market and the current outlook.
Good morning.
Good morning. I just wanted to touch on the market and the current outlook, just to understand your strategy for possibly managing the current environment. It looks like rates will probably be softer and you will be re-chartering below the existing levels. I just wanted to get a sense of how you might manage that, and if the environment's so weak that we should be really thinking about utilization possibly falling off to some point where it's below the historical run rate in the high 90s.
Yeah. First of all, utilization today or in the last quarter was slightly below 100%. Generally, we have the utilization rates of between 98% to 99+% every quarter. Now, we have ships coming off charter until the end of the year, and t his is something normal. You've seen that in this quarter, we chartered 12 ships at rates which today they are at levels that, you know, make sense. Now, what we have been doing is that, as mentioned, we do have a lot of liquidity, slightly below $270 million. We have proactively refinanced debt maturing over the next 12 months. We normally refinance our facilities due a year in advance. We have also been very careful regarding our operating expenses. As you have noticed, in this quarter, we had average operating expenses of close to $5,100 per day per vessel.
I have to stress here that our average ship has a size of close to 7,000 TEUs. We do maintain excellent relationships with our charterers. I agree that the utilization rate can fall, although we cannot predict the future, and we don't know yet what the recovery shape will be and what the type of the recovery will be, and the timing. However, even in that case, based on where we stand today, I think that considering the circumstances, we are in a state where we feel comfortable about weathering the storm. Costamare has been in shipping for 45 years or more. It's not the first crisis we have come across. We came across the 2008, 2009 crisis, where we didn't raise any financial capital during that period. Plus, in the past, we've come along a number of shipping crisis.
It's not the first time we come across a crisis like that. However, I have to say that this is unique. This is something that was definitely unexpected. As I said, I think that the company fundamentals are such, so that I think we are prepared for the next quarters.
Got it and als o just wanted to touch the impact that the coronavirus has had on the shipyards and dry docking. What should we really be expecting for the amount of time that the dry docking takes in the current environment?
Look, for scrubber retrofits, to start with that, the scrubber retrofits have been, even before the coronavirus, there were delays simply because there was a lot of demand for installation of scrubbers and the shipyard capacity was not big enough in order to have this demand absorbed. This has made it even worse, and there are delays, so it could be two or three months or even more or more than 90 days in order to have scrubbers installed. Now, regarding scheduled dry dockings, I cannot predict, but normally we would allow, depending on the vessel, the size, and the circumstances, four to five weeks. Now, this could be something more. I cannot say. It could be five, six, seven weeks. I cannot tell for now.
However, I don't think that this incremental off-hire because of a scheduled dry docking, it would change the fundamentals of our income statement going forward. You talk about a fleet of 65 vessels in the water. You talk about contracted revenues of $2.1 billion. I don't think that the impact from those dry dockings is going to be that huge a nd I'm afraid that I cannot quantify this yet.
Got it. All right. Thank you.
Sure.
Again, if you would like to ask a question, please press star then one. Our next question will come from Ben Nolan of Stifel. Please go ahead.
Hey, Greg. I'll start with some of your contracts, specifically on the 11,000 TEU ships, the three that you contracted. Those are what I would think are pretty good rates. I assume they were probably done a little bit earlier in the timeframe. If I'm not mistaken, there's two more that come off contract soon or now. Could you maybe compare or give some sort of an idea of where you think the market is for those kind of ships relative to the 38,000 or so that you were able to get on the first three?
The first three ships, you mentioned those 11ks, they were chartered for $38,000, the two of them for one year. The third was chartered at $38,750 for a three-year period. Now, those charters were concluded during the first quarter. Not yesterday, I guess it was during the quarter. Now, we have two more sister ships, they come off charter, which is going to be in September, October. It's not something imminent. If those ships were coming out of charter now as well, I think it would have been wise to charter them already. They're coming out of charter September or October. There is still some time for those ships. These are newbuildings, 2017 build, very fuel-efficient vessels which have been in great demand.
I'm afraid that I cannot predict what the rate is going to be for those vessels at the fourth quarter of the year, or at the end of the third quarter or the fourth quarter. Also, the rate is also a function of the charter period. Again, we will have to take a view whether we would like to go for a longer period for X vessels going for a shorter period at a different rate. I'm afraid where the market is today, and bearing in mind that there have been no other recent deals or fixtures for that size, for those type of new buildings, I'm afraid I cannot predict.
Okay.
Now, the two ships chartered to ZIM, they were contracted at the end of March, so it's a month ago. It's not like three or four months ago, just to make this clear.
Right. Okay. No, that's helpful. Another thing, it looks like from the income statement that you guys have been buying back preferred shares. Could you maybe, if you can, quantify what you've done there and sort of what the thinking is around that?
Yeah. We haven't done much for a couple of reasons. First of all, that we have been in a lockout period for the last three, four weeks because of the results, and we may be resuming from tomorrow. Secondly, because there is a thin liquidity for those type of instruments. Now, ballpark figures, we have bought preferreds, I mean, all four classes in aggregate at a dollar value of close to $1.4 million. We had a profit of close to $600,000 , so the redemption of preferreds has been in the face value of $2 million, so p aid in cash $1.4 million, then we have redeemed preferred stock, $2 million worth.
I suppose with those preferreds, I think all four of them still trading below par, once you're locked out, that's still something that you're interested in doing. Yeah.
Yes. I mean, depending on how they trade, now they trade between $18 to $20. We managed to buy some at the price of $14 to $16. We had a profit of $600,000 by paying $1.4 million, which you can argue is quite substantial. As a percent, I mean, the dollar value cannot be that huge. This is something we would resume. As you've seen, we have cash on balance sheet of close to $70. I think it's something that makes sense. The only concern is the liquidity because generally those instruments are thinly traded.
Sure. Yeah. Okay. No, that's helpful. All right. Lastly, from then I'll turn it over. With respect to the five newbuildings for Yang Ming that begin to deliver later this year, I'm just curious if there's any interest or capacity by either yourself or Yang Ming or the shipyard to slip those back a little bit. Is there any flexibility there just given the kind of state of the market and maybe shipyards might have issues crewing and staffing up and everything else. Is that something that may be a possibility?
No, nothing that I can report at this stage. I think the first couple of ships will be delivered just with one month delay. This is the latest schedule we have today which is meaningless considering that each of the five newbuildings have a 10-year charter. Nothing to report regarding whether this could slip out or probably also come forward. Nothing to report at this stage. This is the latest schedule we have. I just have to add that for the sake of clarity, that for those five newbuildings, they have been fully funded on a pre- and post-delivery basis, and the remaining CapEx commitments for the total of the five ships from our side today is close to $31 million. This is why I'm mentioning in my commentary that we have a minimal CapEx commitment.
It's like close to $6 million per vessel, which of course it is something that can be easily paid when the time comes upon delivery.
Okay. All right. No, that's helpful. I appreciate it. Thanks, Greg.
Thank you.
Our next question comes from J Mintzmyer of Value Investor's Edge. Please go ahead.
Hi, good afternoon, Greg. How are you?
Hi. Good morning. How are you? Good?
Doing well. Good results. It is good to see the steady cash flows, even though the market backdrop, of course, is challenging. Great dialogue before as well about the 11k TEU ships. We will look forward to the next ones. I did have a question about the 9.5k TEU ships that came off. I believe they were at 29,000 before. You mentioned the roll, it was three to six months, and it was a confidential rate. Can you provide just a big picture guide of where that was? Was that slightly below, substantially below what it was before?
Yeah. These are five sister ships in total. In total, they are five 9,500 TEU ships built in 2006. We have re-chartered the first two which came off charter, we have re-chartered them for a period of three to six months, as we mentioned. Now regarding the charter rate, I'm afraid because of confidentiality reasons based on discussions we have with the charterer, I cannot go into more detail. Probably in the future when hopefully also the rest of the ships will be chartered, and when also our Christmas ships are going to be re-chartered, then we can give more figures. At this stage, I'm afraid that I'm not at liberty to disclose more on that.
Okay, I understand. I figured I'd try. I figured some broad guidance there. Next question for you. With the coronavirus shutdown of a lot of the ship docks, I know there's been some backup in demolition as well. I know you have several older ships that are coming due for surveys that you might have considered scrapping. There's nine 2000 builds and there's one 1995 build. Are you still planning to demolish any of those vessels this year? Is that possible in this environment?
Yeah, look, first of all, we don't plan to demolish those vessels tomorrow morning, right? Depending on market conditions, we're going to take the view whether it makes sense to keep owning and managing those vessels or not. Also, bearing in mind what is the related CapEx for those vessels in order to continue trading. This is a decision that is going to be taken on a ship-by-ship basis. Now, if we decide to send for demolition of those vessels, I think that the demolition market was down, was completely locked because of the reasons we all know. I hear, and we understand that it is slowly coming back, and wait to see when it will finally open. I cannot give you more details because we have not approached any ship breakers for those vessels to date.
I don't know what would be the timing today if someone wanted to scrap those ships. I don't have information, but we're going to take each one of them as it comes. I don't think that this is something that, if we decide to scrap those vessels, there may be some delay, but finally, at some point, we will scrap them. I think if we take the decision, it's going to be a matter of timing rather than whether we would be able to actually scrap them. It's just it may take some more time, but I don't have more info on this topic. We don't have any ship to be scrapped imminently.
Excellent. Thank you very much, Greg. Keep up the good work.
This concludes our question and answer session. I would like to turn the conference back over to Mr. Zikos for his closing remarks.
Thank you for being with us today. We are looking forward to speaking to you again in our Q2 2020 quarterly results. Thank you.
Thank you. This does conclude our conference for today. Thank you all for participating and you may now disconnect.