Thank you for standing by, ladies and gentlemen, welcome to the Costamare Inc. conference call on the fourth quarter 2016 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, Friday, January 27, 2017. 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, the company delivered solid results. On the chartering side, we continue to employ our vessels, having chartered in total eight ships opening during the last three months. Regarding our financing arrangements, we have refinanced a loan facility which was originally expiring in 2018. Under the new agreement, the balloon payment of $30 million during 2018 has been extended to be amortized over a three-year period till 2021. As mentioned in the past, our goal is to strengthen the company and enhance long-term shareholder value. At the same time, we are actively looking at new transactions in a distressed asset value environment.
Regarding the dividend and the dividend reinvestment plan currently in place, members of the founding family, as has been the case since the inception of the plan, have decided to reinvest in full the fourth quarter cash dividends. Now moving to the slides presentation. On slide three, we are providing a summary of the chartering arrangements which have taken place since September. We chartered in total eight ships over the last months. On slide four, we saw the scrapping of the 2003 built 5,000 TEU vessel Romanos for $6.6 million. Moreover, we show the refinancing we recently completed of an existing credit facility which was due in 2018. The new facility of $32 million is amortized over the next five years and matures at the end of 2021. On the next slide, in November, we issued $72 million worth of common shares.
The founding family participated in the offering by purchasing $10 million worth of the new issuance. Moreover, in January, we declared a $0.10 cash dividend per share on our common equity. As already mentioned, the founding family has decided to invest all the second, third, and fourth quarter cash dividends in new shares under our dividend reinvestment plan. That is in addition to the latest common offering participation. Moving to slide six. On slide six, you can see the fourth quarter 2016 results versus the same period of last year. During the fourth quarter of this year, the company generated revenues of $110 million and adjusted net income of $23 million. For the same period of last year, the revenues amounted to $122 million and the adjusted net income to $33 million.
Our adjusted figures take into consideration the following non-cash items: the accrued charter revenues, the gain or loss on sale of vessels, the gains or losses resulting from derivatives, the amortization of prepaid lease rentals, which is a non-cash charge, and the non-cash G&A expenses. Based on the above, the fourth quarter adjusted EPS amounts to $0.28 versus $0.44 the year before. On slide seven, we are showing the revenue contribution for our fleet. More than 99% of our revenue comes from charters like Evergreen, MSC, Maersk, COSCO, and Hapag-Lloyd. We have $1.5 billion in contracted revenues and a weighted average remaining time charter duration of about 3.2 years. On the next slide, on slide eight, you can see the resilience of our business model.
The bars are the revenues and adjusted net income since 2007, and the dotted line is a time charter index. As you can see in the cyclical industry, irrespective of market movements, the company has been consistently performing based on its long-term contracted cash flow. Slide nine shows the smoothening impact on our debt repayment profile of the recent refinancings, including the $32 million new credit facility, which refinanced an existing loan originally due in 2018. As you will see, there are now no debt matures 2017, and we have reduced our 2018 balloons by approximately $400 million. On slide 10, you can see our remaining CapEx commitments. These are rather low for a company with cash on balances of above $210 million. Our remaining CapEx is less than $35 million without assuming any debt finance on the 5th 11,000 TEU new building.
We are in discussions with our banks for the financing of that ship. Assuming a 50% leverage on this vessel, our remaining CapEx commitments would be in total less than $3 million. Slide 11 deals with the potential effect of the rechartering for the next 12 months. As you can see, even if we assume the 40% discount on new charter rates entered into during next year versus current fixtures, the difference on a revenue basis would be less than 4%. Finally, on the last slide, we're discussing the market. Charter rates and asset values continue to be under pressure, whereas box rates have been experiencing a positive trend. The number of idle ships has gone up to 6.9%. The order book has decreased to 15.7%. As we have mentioned in the past, we are well-positioned to continue to grow in such an environment, which provides for opportunities.
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. That's star then one to ask a question. Your first question comes from the line of Steven Tittsworth of Stifel. Please go ahead.
Hi. Yes, thank you for taking my questions. Just have a few. First one is that we've noticed that box rates, specifically coming out of Shanghai going to L.A., Shanghai going to Europe, they're above $2,000 per day. Pretty much been staying at that level for a while now. Do you see that as an uptick in volume growth or is that more just liner efficiencies right now?
I think we've seen a positive trend in box rates starting more or less from the second half of 2016. You are right, this is something that is still there. The latest GRIs, the general rate increases by the liner companies, seem to have a sticking power. There is a soft element of seasonality there. This is because we are right before Chinese New Year, and you can argue that there are some additional shipments right before the closure of factories in China. However, leaving that aside, I can say that there's a positive trend on box rates. Whether this will persist after Chinese New Year, this means the second week of February, it remains to be seen.
Generally, the case up to now has been that there is a positive trend in demand and at the same time, there is a supply management between liner companies which has helped a lot box rates.
Do you see this leading to potentially higher ship demand assuming the trend continues?
If the trend continues in theory, if there is more demand, in theory, you can argue that liner companies would need more ships. However, when this would happen, I'm afraid I wouldn't like to provide any forecasts. Let me say, however, that witnessing a positive trend in box rates, it's definitely good news for all parties involved. What's going to be the time gap, if any, between an uptick in box rates and charter rates? I'm afraid that I don't want to provide any forecast right now, but it's generally a positive trend.
Okay, perfect. My next question deals with the new builds you have being delivered this year. We noticed there's still no contracts on those. Have you made any progress with that?
You are referring to the 11,000 TEUs because all the 14,000 TEUs have been delivered and they have a 10-year charter, all five of them.
Correct, yeah.
Now, for the 11,000 TEUs, only one of them has been delivered. This was delivered during 2016. The remaining four, they are to be delivered within the first half of 2017. Now, there's a couple of points there. I think we mentioned it also in the press release and in the presentation. The funding for four out of the five new buildings has been in place, so there is no CapEx commitment there. We put all our equity, the delivery installment to the shipyard is to be paid by committed debt. For the fifth one, we are in discussions with a lender in order to, again, arrange a 50% leverage, so there's going to be no equity cash outflow from our side. Costamare has on average 40% on those five new buildings, so practically we have two ships.
Now, regarding the chartering, we don't want to put ourselves under pressure to charter the ships today, especially before the Chinese New Year where traditionally the market is softer. We take a medium to long-term approach. We are very comfortable regarding the potential of those ships. Under our loan agreements, there is no obligation, there is no covenant to have the vessels chartered during the tenure of the loan, as long as, of course, we pay the debt service. We don't feel under pressure there. Of course, we want to charter the vessels. We are in active discussions with a lot of charterers. However, at the same time, we want to make sure that we enter into a charter agreement that makes sense both for ourselves. The long story short, we're going to take our time. We're very comfortable with those ships.
We are in discussions with the charterers, when there is a conclusion of a transaction, we will definitely let you know.
Okay, perfect. My last question just deals with, we've seen a little bit of a resurgence in Panamax vessels, just given how cheap they are. Do you think this trend towards perhaps using more Panamax vessels will continue in the future?
Look, in our case, and I can tell you what we did, and then I guess from that it's going to be evident what we feel about Panamax ships. As you saw, we have sold the Romanos. This is a 5,000 TEU Panamax ship built in 2013. In 2003, it's 14 years old, and we sold it for scrap. We've seen that there may be some increased buying interest in Panamax vessels for scrap or close to scrap. If we had to invest our funds today in a ship, I think we would most probably stay away from the Panamax vessels today based on how we view their medium or long-term chartering potential. I think there are many more opportunities rather than focusing on Panamax vessels. I'm not saying that in the future, you never know. Those transactions may turn out to be excellent deals.
The way we see the market, the way we see what the makeup of the fleet that today that is idle, there is an overhang of 100 Panamax ships. I think most probably we would stay away from buying Panamax vessels today, and our latest transaction, the disposal of Romanos, I think, supports it.
Okay. That does it for me. Thank you for your answers. Appreciate it.
Thank you very much.
Our next question comes from Fotis Giannakoulis of Morgan Stanley. Please go ahead.
Yes. Hi, Greg.
Hi, Fotis.
I want to ask about the overall market. We have seen a trend for consolidation among the liner operators. How does this impact the overall containership market and particularly the charter owners, both near term and longer term?
Look, there is consolidation. I guess this is because market conditions dictate that. The less players in the liner market, I think the more efficiency there is. The reason for that consolidation is to make the market players that are still in the game stronger. I think this is a positive sign because from our side, we want to have strong and healthy clients rather than having 50 liner companies, and some of them, they may not be able to service their obligations. From that point of view, this is a positive sign. We have also seen box rates picking up over the last six, eight months.
Now, you can argue that short-term because the supply management now of vessels is in the hands of fewer players, short-term, more vessels will be redelivered to the ship owners. There may be less demand for new tonnages to be chartered in, which is something we appreciate. However, I would say that medium to long-term. Container shipping is about long-term. This is a positive trend because we need healthy clients. Those who will now survive will enjoy the benefits of a better market in the future. Medium to long-term, we definitely believe that this is a move in the right direction.
Okay. Thank you, Greg. Can you also comment about the new building market? Secondhand values are at a very steep decline to new buildings, given the very large idle capacity that is out there. First of all, these idle vessels, are they real? Are they going to be able to come back to the market? These are all going to be scrapped, we shouldn't consider them a part of the fleet? Second, what will make asset values for secondhand vessels become more at parity with new building prices? Is there a market for more new buildings? A big part of your growth in the past has been signing long-term contracts for new building vessels.
Yeah. First of all, regarding the ships that are being laid up today, the idle fleet today is close to 7% of the fleet in the water, which is a big figure. In that number, it includes close to 100 Panamax, which is an overhang, which is the main problem, or you can argue that this is one of the main problems of container shipping today, an excess of 100 Panamax ships that are there. Now, those ships are not scrapped. Those ships are there for employment. We had a record scrapping in 2016, which was above 650,000 TEUs. Those ships were not scrapped, and the reasons that they have not been scrapped up to now, it may have to do with financing arrangements in place where the loan outstanding exceeds the scrap value or today's asset values.
There may be accounting losses that ship owners or banks may not want to take. There's a lot of reasons. From our side, I think we did the right thing. We had the Panamax ship, we took an accounting loss, and we repaid loan outstanding over and above what was the demolition price because we felt this is the right thing to do. Regrettably, this is not what everybody does. No, those ships may or may not be scrapped, but it's there for employment, and this is what is driving the whole market down. Now, regarding new buildings, today you can argue that there is no new building market for containers. Liner companies are not willing to commit into new projects. They are forming alliances. For the time being, I don't think they need additional tonnage. Quite the opposite.
There are a lot of TEUs, especially larger vessels, to be delivered within 2017. Apart from some minor exceptions, the new building market today for containers is not existing. Now, asset values for the secondhand ships, they are at very low prices. You can get broker valuations that ships in some of the classes above 10, 12 years old, if they don't have charter employment, they can be valued close to scrap or slightly higher than scrap. What's going to this is going to be charter rates. Charter rates and asset values that are highly correlated. Regarding the new buildings, the market is not very liquid. Probably this is why you don't see a lot of changes in the new building prices. But the pricing there may not be that important today simply because this market is closed.
For this market to open, there needs to be additional requirements for tonnage, which I cannot see how this is going to happen within, I would say, the next couple of quarters at least, if not longer than that.
Greg, just to follow up on my previous question about consolidation. This consolidation has been limited so far on liner operators. We haven't seen any consolidation among charter owners or any sizable deals among charter owners. Given the fact that you recently raised capital, and your balance sheet is relatively stronger than most of your public and private peers, are there any discussions? Is this a trend that it might flow from the liner industry to the charter owners at the next wave?
Look, the charter owners market is much more fragmented compared to the liner companies. This is correct. On the other hand, although there may not have been this level of consolidation we've seen in the liner business, you can see that there are very few players left who have the ability to enter into new business to do any secondhand transactions, medium to long-term charters to buy ships. There are very few players left. There may not be consolidation, however, a big part of the charter owners market is not able to do any new deals. From our side, we are looking at transactions actively, very actively, no new buildings because there is no market, but the secondhand ships from various sources, I think it would be a bit premature now to go into more detail of sort of what we look at.
As you mentioned, we have cash on our balances, and the main reason for this equity offering was growth. I guess that today's environment ticks the box. We have the joint venture with York. We are actively looking at new business. Hopefully, we will be able to come with some news during our next quarterly results or, as soon as there is something in place.
One last clarification question. You initiated a dividend reinvestment plan last summer. Has the family participated this quarter in this dividend reinvestment plan? Also, can you remind us what is the ownership of the family and if you have any guidance of the family's intention on participating in this plan in the future?
Yes. Since we put this plan in place, the family has been fully participating. Since this plan was instituted, the family has not received any $0.01 in cash dividends. All the cash dividends have been used in getting new shares. The same applies for the last quarter, for the fourth quarter, where the family has fully participated in the DRIP. This is the intention going forward. As you can imagine, I cannot commit from now. If you see what we've done since we put the DRIP together, I think this shows great support of the family to this company. After the latest equity offering, which we concluded in November, the founding family's participation today is in the region of 60%. I have to remind you that in the latest equity offering, the family also bought $10 million worth of shares.
Has never sold a single share since the company went public in November 2010. On the contrary, has participated in all common equity offerings and has been fully investing its cash dividends in the institution of the DRIP.
Thank you very much, Greg.
Thank you. Thanks.
Our next question comes from John Gandolfo of Clarksons Platou. Please go ahead.
Hi. Thanks, guys, for taking my question. Just a quick follow-up on the vessels within the 4Q for the JV. I'm wondering what the status is on that in terms of it hasn't been chartered out. Is it currently idle, laid up?
Sorry, you are referring to the 11,000 TEU new building?
Yeah.
Yes. This was delivered in September of last year. The vessel is currently laid up close to the shipyards. Correct. Yes, go ahead.
Yeah, I was going to say, now that you've laid up that vessel, is there any cost savings opposed to actually taking delivery of the ship and idling it?
Well, we made sure that the costs that have to do with laying up the vessels are being minimized. I cannot go into more detail because this also involved third parties. The layup costs are really minimal. It's not worth discussing.
Okay. Just to follow up, one last thing on that, should we look for a similar situation as the remaining new builds deliver on the 11,000 TEUs until they are actually chartered out?
Look, they will be delivered within the first half of this year. I don't want to predict now when they will be chartered, for what rate and for what period. We can charter the ship today. However, the rate, together with the tenure, may not be what we have in mind, so it may be worth waiting a bit. It's not only for the new buildings. If we have any ships being laid up, we make sure that the layup costs are being minimized, and we follow the same principle with those new buildings should some of them be laid up in the future. As I mentioned earlier, our goal is to charter the vessels. We feel extremely comfortable with our chartering potential moving forward. We shouldn't be forgetting that those ships, those assets, have a 25 to 30 year useful life.
Whether it's going to be a good investment or not, it's not something that should be judged within a month after the ship's delivery. Container shipping is about long-term. We are patient. We have been patient. Let's see what's going to be the final return on those transactions.
Got it. Thank you very much for your time.
Once again, if you have a question, please press star then one. Again, it is star then one if you wish to ask a question. Seeing no further questions, I would like to turn the conference back over to Mr. Zikos for any closing remarks.
Thank you. Thank you very much for dialing in today and for your interest in Costamare. We are looking forward to speaking to you again during our next quarterly results call. Thank you.
Thank you. That does conclude our conference for today. Thank you all for participating. You may now disconnect.