Thank you for standing by, ladies and gentlemen, and welcome to the Costamare Inc. onference call on the Fourth Quarter 2018 Financial Results. We have with us today 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, Thursday, January 24th, 2019. 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. During the fourth quarter and the year, the company delivered profitable results. The year 2018 closed on a mixed note. While charter rates rallied in the first half of the year, average rates fell in the second half, finishing the year slightly below their starting point, except for the larger ships. During the last weeks, however, we have witnessed a tighter market with regards to large modern vessels, where supply has been limited, driving up charter rates. We have been active during the year, entering into new transactions with a total value of close to $900 million. These include both new buildings and secondhand ships, with an average time charter duration of eight years.
Finally, on the financing side, we financed with the leading financial institutions the two recently acquired 1996-built 8,000 TEU sister container ships, as well as a $25 million balloon during December of last year, secured by older vessels. We have no meaningful balloon repayments over the next 12 months. Turning now to the slides presentation. On slide three, you can see the highlights. The adjusted EPS is $0.12. Over the last month, we have chartered 12 vessels. The total value of new building orders and secondhand acquisitions by the company within the year amount to $900 million. We financed the two 8,000 TEU container ships, which were acquired in Q3 2018, and are chartered to Maersk for 2.5 years. We concluded the refinancing of two credit facilities with an outstanding loan amount of about $44 million.
We do maintain a strong balance sheet with approximately 50% leverage and no off-balance sheet financing. Regarding the market, the idle fleet is 2.5%, and the new build deliveries in 2019 are expected to be around 5% of the existing fleet, excluding any scrapping and sleepers. On slide four, you can see a summary of our recent chartering activity. What is worth mentioning here is the recent chartering of the 11,000 TEU vessels Cape Sounio and Cape Artemisio at rates of above $32,000 per day. Moving on to slide five, you can see our dividend payments as well as the sale for scrap of an older vessel. On slide six, you can see the fourth quarter 2018 figures. During the fourth quarter of this year, the company generated revenues of $106 million and adjusted net income of $13 million.
Based on the above, the fourth quarter adjusted EPS amounts to $0.12. Our adjusted figures take into consideration the following non-cash items: the accrued charter revenues, accounting gains or losses from asset disposals, prepaid lease rentals, and other non-cash charges. On slide seven, you can see a list of the transactions we concluded during the year. Those transactions were primarily focused on deals with long-term charters attached. The incremental contracted revenues amount to $1.1 billion over an average charter period of eight years. On slide eight, we are showing the revenue contribution for our fleet. Almost 100% of our contracted cash comes from first-class charterers like Maersk, MSC, Evergreen, Yang Ming, Hapag-Lloyd and COSCO. We currently have $2.3 billion in contracted revenues and a remaining time charter duration of about 3.8 years. On the last slide, we are discussing the market.
Regarding charter rates, there has been a further softening in the market during Q4, especially for the smaller-sized vessels. The idle fleet still stands at a low level of 2.5%. The older group remains at 13%. As already mentioned in the past, we are actively looking for new transactions in this market 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. The first question comes from Chris Wetherbee with Citi. Please go ahead. Chris, your line is open.
Hi, James on for Chris. I wanted to ask about essentially the transaction market. Given the rate environment and the rate outlook, it seems like a great good environment. What would be your preference essentially for buying out existing JVs or acquiring older tonnage?
Yeah. A couple of things. We are generally indifferent for smaller and bigger ships, as long as the numbers make sense and we can consider pretty much everything, and this is something you can also see from our fleet mix. For the JV vessels, we bought the 6% that York owned in these five 14,000 TEU vessels, which had a remaining time charter period up until 2026, and contracted revenues north of $350 million. The numbers made sense for us. In the JV with York, we also have some five 11,000 TEUs, newbuildings delivered recently, over the last couple of years, which have a charter period of close to one year. This is something we can consider as well, but mainly for younger vessels, we would prefer to have a time charter attached.
Leaving those ships aside, you can see that we have also bought secondhand ships without employment, as long as we feel comfortable with the earnings potential of the asset.
The next question comes from Ben Nolan with Stifel. Please go ahead.
Hi, this is Frank Galanti on for Ben.
Hi.
Hi. With the weakness in the share price recently and a number of other shipping companies announcing share buyback programs, I wanted to get your thoughts on any interest in doing so, and if there was any limitations on a share buyback program.
Yeah. A couple of things. First, the share buyback program, it is something that will be decided by the board. It's not something that I can decide now myself. I can tell you some thoughts about it. First of all, we normally do buy assets, and we expect to generate cash flows and returns from those assets. It doesn't mean that we don't believe that our stock price, the Costamare common stock, is today undervalued and underpriced. I think most of it has to do with the more generic economic conditions rather than with the company fundamentals itself. This is something we may consider in the past. However, we also need to consider restrictions in the liquidity of the stock and the cash that we would have available in order to put this cash into work for new transactions.
It's those two things which of course will be considered alongside the fact that the stock price today is undervalued and that a share buyback is something that might make sense. I'm not prepared yet to tell you exactly what the board will be deciding on that.
Okay. Yeah, that's helpful. To follow up on capital constraints. In the press release, it was mentioned that you guys spent $900 million last year. Do you have a rough outline on how much additional CapEx room the company would have going forward without the need to raise additional equity?
Yeah. This $900 million is the total value of the assets we bought, which were partly funded with debt and partly funded with equity. This is the first point. The second point is that today our equity CapEx commitments amount to $31 million. All the newbuildings, the funding of the newbuildings for the five Yang Ming 15,000 TEU ships has been in place, the debt. The remaining CapEx we have today from an equity perspective, from our cash, is $31 million, and that's all. There's nothing else. We have cash on balance sheet today north of $160 million, and the company is generating a positive EBITDA. Bearing all those in mind, I don't think that we are in a position today where in order to grow, also considering our very good access to commercial bank debt, that we would need to raise equity. Quite the contrary.
We can grow today into new transactions without the need of equity based on the cash on balance sheet, based on the very limited CapEx commitments we have, and based on the cash flow generation from the ships in the water.
Okay. That's all I had. Thank you very much.
Thank you.
The next question comes from Donald McLee with Berenberg. Please go ahead.
Good morning.
Hi, Donald. Good morning.
Just going back to the scrubber installs from Q3, were those open-loop or closed-loop? As a follow-up to that, how do you anticipate the recent bans on open-loop scrubbers in Singapore, China, and the UAE impacting either your thought process or your discussions with customers on incremental scrubber installs and their overall IMO 2020 strategy?
Yeah. The scrubbers agreed for the five MSC vessels, they are closed-loop scrubbers. The type of the scrubbers, which is also affecting the cost of buying and installing this equipment, it is a decision made by the charterer. The charterer, because it's going to be receiving all the benefit from the fuel-saving costs, logically will have to bear all the associated costs. It is a charter decision. For MSC, these are closed-loop scrubbers. We know that there are restrictions in the use of the open-loop scrubbers in China, in Singapore. There were also some articles about Middle East restrictions recently. We know that, but it is a decision of the charterer mainly, and as long as the charterer pays for that equipment during the tenure of the employment of the vessel, we will cater to the needs of the charterer.
Right. As those policies have changed, have you sensed any change in what direction some of the customers are going to go in?
We are in discussions with other charterers as well for the installation of scrubbers. It has not been finalized yet. I think they know very well the restrictions that they have to do with the open-loop scrubbers. At the same time, there is a price difference. We're currently in the process of the charterers evaluating the costs of the scrubber types that will be used. I don't think a final decision has been made for the rest of the fleet. We're discussing 5 more vessels in the water today about scrubber installation, and we have already, as I said, concluded with MSC for the 5 MSC ships where closed-loop scrubbers will be installed.
Okay, great. That's helpful. Just one more on the dividend. Could you comment on the level of participation in the DRIP from the founding family in Q4? I think Q3 was the first quarter where it wasn't full participation, just wondering if that's changed back to the status quo.
I think that, okay, in Q3, the participation might not have been full but it has been for a substantial number of shares. In Q4, I think it is going to be at least the same participation like in Q3 if not bigger than that. I have to remind you, however, that this DRIP and the founders' support to the company has been in place since June 2016. I mean, it has been in place for over two years. It is actually two and a half years up to now.
Thank you.
It has been quite substantial. Sure. Thank you.
Again, if you have a question, please press star then one. The next question comes from Max Yaras with Morgan Stanley. Please go ahead.
Hi. Yes, thank you. I'd like to ask a couple of market questions. You mentioned earlier that larger ships are kind of creeping up in rates recently, while smaller ships haven't been doing as well. Just what's explaining the divergence and what's driving rates higher for the larger ships?
Yeah. For the larger ships, what we've seen recently over the last weeks or month and a half, is that especially for large modern vessels, ships similar to the 11,000 TEUs we have, there are very few ships left in the spot market. There is quite substantial demand from charterers for those types of vessels, which logically is bringing charter rates up. The latest fixes we did for those ships were like $22,000, $23,000 per day. I have to remind you that in 2016, the rates for those vessels were $17,000-$20,000. Should the same supply-demand dynamics continue, I think that the charter rates for those vessels should go up substantially. We have not seen the same dynamics today for the smaller vessels, either for the traditional Panama ships, either the 4,250 or the traditional longer Panama vessels, the 5,000 TEU or for the 3,500 TEU.
For example, the traditional Panama ships, they are now trading at below $10,000, whereas in the past, they were trading at $10,000 or a little north of that. It's all supply and demand.
Okay. I'm wondering, could this partially be driven by liners securing other ships as they install scrubbers on their own, or has that not really started yet, or do you expect that to happen?
No. Look, for the larger vessels, you're right. There are a couple of additional considerations. First of all, it is expected that a lot of larger ships will be taken off hire for retrofitting for the scrubber installation. This is going to create some additional demand, assuming that the scrubber installation is going to take between 3 - 5 weeks. During that period, there is a number of larger vessels which are going to be fitted with scrubbers. During that period, there's going to be incremental demand for those ships or for larger vessels, which is going to lift the market up. This is one consideration. Another consideration is that we have seen ships in the major lanes slowing down, or there is a tendency of slowing down, and the new regulations may provide liners with an additional incentive to slow steam even further.
In that case, for the larger vessels, there will definitely be one more, you can argue there's going to be more upside, more demand will be generated. It is a couple of considerations for the larger ships especially, which I would say provide us with a lot of optimism for 2019.
That's helpful. Thank you.
Thank you.
This concludes our question and answer session. I would now like to turn the conference back over to Mr. Zikos for any closing remarks.
Thank you very much for dialing in and for being here with us today. We are looking forward to speaking to you again during the Q1 2019 conference results call. Thank you.
This conference is now concluded. Thank you for attending today's presentation. You may now disconnect.