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Capital Product Partners L.P. Announces Third Quarter 2022 Financial Results

Capital Product Partners, L.P.
Capital Product Partners, L.P.

ATHENS, Greece, Nov. 09, 2022 (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, 2022.

Highlights

 

Three-month periods ended September 30,

 

2022

2021

Increase

Revenues

$71.9 million

$43.1 million

67%

Expenses

$40.4 million

$27.8 million

45%

Net Income

$58.7 million

$11.9 million

393%

Net Income per common unit

$2.90

$0.62

368%

Average number of vessels1

19.4

16.6

17%

  • Operating Surplus2 and Operating Surplus after the quarterly allocation to the capital reserve for the third quarter of 2022 were $37.6 million and $7.8 million, respectively.

  • Announced common unit distribution of $0.15 for the third quarter of 2022.

  • Successfully concluded a €100.0 million Senior Unsecured Bonds issuance (together with the €150.0 million Senior Unsecured euro-denominated bonds issued in October 2021, the “Bonds”) on the Athens Exchange.

  • Delivered the M/V Archimidis and the M/V Agamemnon to their new owners in July 2022.

  • Repurchased 287,124 of the Partnership’s common units during the nine months ended September 30, 2022, at an average cost of $15.41 per unit.

1 Average number of vessels is measured by aggregating the number of days each vessel was part of our fleet during the period and dividing such aggregate number by the number of calendar days in the period.

2 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.

In October 2022, the Partnership took delivery of the M/V Manzanillo Express, the first of three 13,312 twenty-foot equivalent (“TEU”) container vessels we have agreed to acquire together with one LNG carrier (“LNG/C”). Upon its delivery to CPLP, the M/V Manzanillo Express commenced its ten-year charter with Hapag-Lloyd.

Overview of Third Quarter 2022 Results

Net income for the quarter ended September 30, 2022, was $58.7 million, compared with net income of $11.9 million for the third quarter of 2021. Net income for the third quarter of 2022 includes a gain of $47.3 million from the sale of the M/V Archimidis and the M/V Agamemnon. After taking into account the interest attributable to the general partner and the allocation of net income to unvested units, net income per common unit for the quarter ended September 30, 2022, was $2.90. Net income per common unit excluding the gain on sale of vessel of $47.3 million, was $0.57, compared to net income per common unit of $0.62 for the third quarter of 2021.

Total revenue for the quarter ended September 30, 2022 was $71.9 million, compared to $43.1 million during the third quarter of 2021. The increase in revenue was primarily attributable to the net increase in the average number of vessels in our fleet by 17%, following the delivery of four LNG/Cs during the fourth quarter of 2021, partly offset by the sale of the M/V Adonis in December 2021, the M/V Archimidis and the M/V Agamemnon in July 2022.

Total expenses for the quarter ended September 30, 2022 were $40.4 million, compared to $27.8 million in the third quarter of 2021. Voyage expenses for the quarter ended September 30, 2022, increased to $4.4 million, compared to $3.0 million in the third quarter of 2021, due to the increase in the average size of our fleet and the increase in voyage expenses incurred by a vessel in our fleet employed under voyage charters, compared to the respective period in 2021. Total vessel operating expenses during the third quarter of 2022 amounted to $17.0 million, compared to $11.3 million during the third quarter of 2021. The increase in vessel operating expenses was mainly due to the net increase in the average number of vessels in our fleet. Total expenses for the third quarter of 2022 also include vessel depreciation and amortization of $16.2 million, compared to $11.0 million in the third quarter of 2021. The increase in depreciation and amortization during the third quarter of 2022 was mainly attributable to the net increase in the size of our fleet, partly offset by lower amortization of deferred dry-docking costs. General and administrative expenses for the third quarter of 2022 amounted to $2.8 million as compared to $2.6 million in the third quarter of 2021. The increase in general and administrative expenses was mainly attributable to the increase in the amortization associated with our equity incentive plan.

Total other expense, net for the quarter ended September 30, 2022, was $20.0 million compared to $3.4 million for the third quarter of 2021. Total other expense, net includes interest expense and finance costs of $14.9 million for the third quarter of 2022, as compared to $3.6 million for the third quarter of 2021. The increase in interest expense and finance costs was mainly attributable to (i) the increase in the LIBOR weighted average interest rate compared to the third quarter of 2021 and (ii) the net increase in our total outstanding indebtedness, following the issuance of €150.0 million of Bonds in October 2021 and €100.0 million of Bonds in July 2022 and the debt we assumed following the acquisition of four LNG/Cs during the fourth quarter of 2021, partly offset by the scheduled principal payments during the period, debt repayments in connection with the sales of the M/V Adonis in the fourth quarter of 2021, the M/V Archimidis and the M/V Agamemnon in July 2022 and by the full repayment of two of our credit facilities of a total amount of $95.7 million during the quarter. Total other expense, net also includes a net loss of $2.3 million related to the cross-currency swap agreements associated with the Bonds and an unrealized foreign exchange loss of $2.9 million resulting from the decrease in the U.S. Dollar equivalent of the cash balances we maintained in Euros as of September 30, 2022.

Capitalization of the Partnership

As of September 30, 2022, total cash amounted to $144.2 million. Total cash includes restricted cash of $9.7 million which represents the minimum liquidity requirement under our financing arrangements.

As of September 30, 2022, total partners’ capital amounted to $613.7 million, an increase of $88.2 million compared to $525.5 million as of December 31, 2021. The increase reflects net income for the nine months ended September 30, 2022 and the amortization associated with the equity incentive plan, partly offset by distributions declared and paid during the period in the total amount of $9.1 million, the repurchase of common units for an aggregate amount of $4.4 million and other comprehensive loss of $4.7 million resulting from the change in the fair value of the cross currency swap agreement we designated as accounting hedge, partly set off by the decrease in the U.S. Dollar equivalent of our euro-denominated Bonds linked to the relevant cross currency swap agreement, as of September 30, 2022.

As of September 30, 2022, the Partnership’s total debt was $1,190.9 million, before financing fees, reflecting a decrease of $126.5 million compared to $1,317.4 million as of December 31, 2021. The decrease is attributable to the scheduled principal payments for the period of $77.6 million, debt repayments in connection with the sale of the M/V Archimidis and the M/V Agamemnon of $28.0 million, the repayment in full of our 2017 and 2020 credit facilities of a total amount of $95.7 million and the $26.5 million decrease in the U.S. Dollar equivalent of the euro-denominated Bonds as of September 30, 2022, partly offset by the issuance of €100.0 million ($101.3 million) Bonds in July 2022. Following the repayment in full of our 2017 and 2020 credit facilities, seven vessels in our fleet are unencumbered.

Operating Surplus

Operating surplus for the quarter ended September 30, 2022, amounted to $37.6 million, compared to $43.9 million for the previous quarter ended June 30, 2022, and $25.8 million for the third quarter of 2021. We allocated $29.7 million to the capital reserve, a decrease of $1.4 million compared to the previous quarter due to the decreased debt amortization resulting after the debt repayments, and the inclusion in the capital reserve of $3.5 million corresponding to an additional reserve for the Bonds issued in July 2022. Operating surplus for the quarter ended September 30, 2022, after the quarterly allocation to the capital reserve was $7.8 million.

Issue of Senior Unsecured Bonds on The Athens Exchange

In July 2022, the Partnership, through its wholly owned subsidiary, CPLP Shipping Holdings PLC, issued €100.0 million of senior unsecured bonds on the Athens Exchange. The bonds are guaranteed by the Partnership. The bonds will mature in July 2029 and have a coupon of 4.40%, payable semi-annually. In connection with the issuance of the bonds, we entered into a cross-currency swap agreement to manage the related foreign currency exchange risk by effectively converting the fixed-rate, euro-denominated bonds, including the semi-annual interest payments for the period from July 26, 2022, to July 26, 2029 to fixed-rate, U.S. Dollar-denominated debt. The economic effect of the swap agreements is to eliminate the uncertainty of the cash flows in U.S. Dollars associated with the issuance of the bonds by fixing the principal amount at $101.8 million with a fixed annual interest rate of 6.55%.

Russia-Ukraine conflict

Due to the ongoing Russian conflicts with Ukraine, the United States (“U.S.”), European Union (“E.U.”), Canada and other Western countries and organizations have announced and enacted numerous sanctions against Russia to impose severe economic pressure on the Russian economy and government.

As of today, and to the Partnership’s knowledge, current U.S. and E.U. sanctions regimes do not materially affect the business, operations or financial condition of the Partnership and the Partnership’s counterparties are currently performing their obligations under their respective time charters in compliance with applicable U.S. and E.U. rules and regulations.

Sanctions legislation has been changing and the Partnership continues to monitor such changes as applicable to the Partnership and its counterparties. The full impact of the commercial and economic consequences of the Russian conflict with Ukraine is uncertain at this time. Currently, the LNG/C market is benefiting from the energy security concerns amid the Russia-Ukraine conflict (see also Market Commentary Update below).

COVID-19

We continue to monitor the impact of COVID-19 on the Partnership’s financial condition and operations and on the container and LNG industry in general. While it is not always possible to distinguish incremental costs or off-hire associated with the impact of COVID-19 on our operations, we estimate that for the third quarter of 2022, incremental operating and/or voyage costs associated with COVID-19 were approximately $0.2 million.

The actual impact of the COVID-19 pandemic in the longer run, as well as the extent of any measures we take in response to the challenges presented by it, as described in our previous releases, will depend on how the pandemic will continue to develop, the continued distribution of vaccines, the duration and extent of the restrictive measures that are associated with the pandemic and their further impact on global economy and trade. Currently, the container charter market is benefiting from the impact of COVID-19 on the global trade logistics chain. (see also Market Commentary Update below).

Management Commentary

Mr. Jerry Kalogiratos, Chief Executive Officer of our General Partner, commented:

“We are delighted to see the continued strong financial performance of the Partnership during the third quarter of 2022 compared to the same period last year, driven by a number of key strategic commercial and financial decisions.”

“Building on our fleet renewal program, we have taken delivery in the last 12 months of four brand new additional LNG/Cs and one 13,312 TEU container vessel, while we have committed to acquire one more LNG/C and another two 13,278 TEU container vessels, all with long-term charters attached. Accordingly, we have divested four older container vessels taking advantage of historically high asset prices. As a result, the weighted average age of our fleet is 6.3 years and remaining charter duration 7.0 years with a contracted revenue backlog of approximately $1.9 billion.”

“In addition, the Partnership’s successful €100.0 million issue of seven-year unsecured bonds was followed by debt repayments of $123.7 million, maintaining the overall leverage at conservative levels, while reducing exposure to rising interest rates.”

“All the above and consistent with the Partnership’s capital allocation policy of an active unit repurchase program and quarterly distributions, demonstrate the Partnership’s commitment to continue to grow its asset base, while returning capital to its unitholders.”

Unit Repurchase Program

On January 25, 2021, the Partnership’s Board of Directors of the Partnership (the “Board”) approved a unit repurchase program, providing the Partnership with authorization to repurchase up to $30.0 million of units of the Partnership’s common units, effective for a period of two years. During the quarter ended September 30, 2022, the Partnership repurchased 102,085, common units at an average cost of $14.63 per unit or 669,374 common units since the launching of the unit repurchase plan on February 19, 2021, at an average cost of $13.31 per unit.

Quarterly Common Unit Cash Distribution

On October 20, 2022, the Board declared a cash distribution of $0.15 per common unit for the third quarter of 2022 payable on November 10, 2022 to common unit holders of record on November 2, 2022.

Market Commentary Update

Container market

Container charter rates have decreased significantly over the third quarter of 2022 amid demand headwinds, easing congestion and weaker sentiment. Despite both freight and charter rates easing recently, they still stand higher than the 2021 year-on-year average.

Continued softening in market conditions should be expected according to analysts in the near-term amid concerns over the global economic outlook. Trade is now expected to fall by 0.3% in 2022, compared to a 4% growth forecast at the beginning of the year.

The container vessel orderbook stands at 27.9% as of end of October. For the first time in years, the number of fully cellular container vessels scrapped in the first nine months of 2022 is almost zero with only 2 small units recorded as sold for recycling this year, with total TEU of 1,384.

LNG market

The LNG/C charter market continues to strengthen, with spot rates rising sharply in September. The market is supported by energy security concerns amid the Russia-Ukraine conflict and record high floating storage, as traders are positioning themselves for the winter.

Term charter rates have seen continuous upward pressure through the third quarter, with 1-year rates for a 2-stroke vessel increasing from $160,000 per day at the start of the quarter to $230,000 per day by the end of the quarter. For steam turbine vessels, the increase was less marked, as expectations for persistent high LNG prices and the upcoming environmental regulations make them less attractive to charterers.

The LNG fleet orderbook stands at 42% of the total fleet with 50 new orders placed within the third quarter of 2022, 30 of which are for the Qatar North Field Expansion project. Simultaneously, the current price of a newbuilding vessel has reached in excess of $245.0 million.

Conference Call and Webcast

Today, November 9, 2022, 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: +1 877 405 1226 (US Toll-Free Dial In) or +1 201 689 7823 (US and Standard International Dial In). Please quote “Capital Product Partners” to the operator and/or conference ID 13734083. Click here for additional participant International Toll-Free access numbers.

Alternatively, participants can register for the call using the call me option for a faster connection to join the conference call. You can enter your phone number and let the system call you right away. Click here for the call me option.

Slides and Audio Webcast

There will also be a live, and then archived, webcast of the conference call and accompanying slides, available through the Partnership’s website. To listen to the archived audio file, visit our website http://ir.capitalpplp.com/ and click on Webcasts & Presentations under our Investor Relations page. 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 20 vessels, including six latest generation LNG/Cs, ten Neo-Panamax container vessels, three Panamax container vessels and one Capesize bulk carrier vessel. This excludes two 13,278 TEU container vessels and one LNG/C that CPLP has agreed to acquire and expected to be delivered between the first quarter of 2023 and the second quarter of 2023.

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 CPLP’s business, CPLP’s ability to pursue growth opportunities, CPLP’s expectations or objectives regarding future distributions, unit repurchases, market and charter rate expectations, and, in particular, the expected effects of recent vessel acquisitions and the Russia-Ukraine conflict and COVID-19 on the financial condition and operations of CPLP and the container and LNG/C industries in general, are forward-looking statements (as such term 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. For a discussion of factors that could materially affect the outcome of forward-looking statements and other risks and uncertainties, see “Risk Factors” in CPLP’s annual report filed with the SEC on Form 20-F for the year ended December 31, 2021, filed on April 27, 2022. 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 Kalogiratos
CEO
Tel. +30 (210) 4584 950
E-mail: j.kalogiratos@capitalpplp.com

Capital GP L.L.C.
Nikos Kalapotharakos
CFO
Tel. +30 (210) 4584 950
E-mail: n.kalapotharakos@capitalmaritime.com

Investor Relations / Media
Nicolas Bornozis
Capital Link, Inc. (New York)
Tel. +1-212-661-7566
E-mail: cplp@capitallink.com

Source: Capital Product Partners L.P.


Capital Product Partners L.P.
Unaudited Condensed Consolidated Statements of Comprehensive Income
(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 30,

periods ended September 30,

 

2022

 

2021

 

2022

 

2021

 

Revenues

71,858

 

43,125

 

219,174

 

121,091

 

Expenses / (income), net:

 

 

 

 

Voyage expenses

4,386

 

3,032

 

12,417

 

7,469

 

Vessel operating expenses

14,779

 

9,901

 

43,334

 

28,188

 

Vessel operating expenses - related parties

2,254

 

1,405

 

6,825

 

4,007

 

General and administrative expenses

2,771

 

2,555

 

6,665

 

5,915

 

Gain on sale of vessels

(47,275

)

-

 

(47,275

)

(25,384

)

Vessel depreciation and amortization

16,246

 

10,954

 

52,278

 

32,101

 

Operating income, net

78,697

 

15,278

 

144,930

 

68,795

 

Other income / (expense), net:

 

 

 

 

Interest expense and finance cost

(14,945

)

(3,631

)

(36,997

)

(11,208

)

Other (expense) / income, net

(5,024

)

228

 

(3,638

)

570

 

Total other expense, net

(19,969

)

(3,403

)

(40,635

)

(10,638

)

Partnership’s net income

58,728

 

11,875

 

104,295

 

58,157

 

General Partner’s interest in Partnership’s net income

1,014

 

216

 

1,803

 

1,072

 

Partnership’s net income allocable to unvested units

2,157

 

257

 

2,835

 

1,271

 

Common unit holders’ interest in Partnership’s net income

55,557

 

11,402

 

99,657

 

55,814

 

Net income per:

 

 

 

 

• Common units, basic and diluted

2.90

 

0.62

 

5.17

 

3.08

 

Weighted-average units outstanding:

 

 

 

 

• Common units, basic and diluted

19,162,451

 

18,201,471

 

19,264,330

 

18,125,429

 


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

 

 

As of September 30, 2022

 

 

As of December 31, 2021

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

$

134,453

 

$

20,373

Trade accounts receivable

 

3,253

 

 

6,025

Prepayments and other assets

 

6,101

 

 

4,835

Inventories

 

5,189

 

 

5,009

Claims

 

1,335

 

 

1,442

Total current assets

 

150,331

 

 

37,684

Fixed assets

 

 

 

 

 

Advances for vessels under construction – related party

 

30,000

 

 

-

Vessels, net

 

1,651,898

 

 

1,781,858

Total fixed assets

 

1,681,898

 

 

1,781,858

Other non-current assets

 

 

 

 

 

Above market acquired charters

 

36,424

 

 

48,605

Deferred charges, net

 

538

 

 

2,771

Restricted cash

 

9,697

 

 

10,614

Prepayments and other assets

 

3,677

 

 

3,638

Total non-current assets

 

1,732,234

 

 

1,847,486

Total assets

$

1,882,565

 

$

1,885,170

Liabilities and Partners’ Capital

 

 

 

 

 

Current liabilities

 

 

 

 

 

Current portion of long-term debt, net (including $10,000 payable to related party as of December 31, 2021)

$

68,556

 

$

97,879

Trade accounts payable

 

8,614

 

 

9,823

Due to related parties

 

3,014

 

 

2,785

Accrued liabilities

 

14,012

 

 

11,395

Deferred revenue

 

16,754

 

 

8,919

Total current liabilities

 

110,950

 

 

130,801

Long-term liabilities

 

 

 

 

 

Long-term debt, net (including $6,000 payable to related party as of September 30, 2022, and December 31, 2021)

 

1,112,675

 

 

1,211,095

Derivative liabilities

 

33,750

 

 

3,167

Below market acquired charters

 

11,445

 

 

14,643

Total long-term liabilities

 

1,157,870

 

 

1,228,905

Total liabilities

 

1,268,820

 

 

1,359,706

Commitments and contingencies

 

 

 

 

 

Total partners’ capital

 

613,745

 

 

525,464

Total liabilities and partners’ capital

$

1,882,565

 

$

1,885,170


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

 

 

For the nine-month periods ended September 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

Net income

$

104,295

 

$

58,157

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Vessel depreciation and amortization

 

52,278

 

 

32,101

 

Amortization and write-off of deferred financing costs

 

2,239

 

 

1,886

 

Amortization / accretion of above / below market acquired charters

 

8,983

 

 

4,861

 

Gain on sale of vessels

 

(47,275

)

 

(25,384

)

Equity compensation expense

 

2,181

 

 

1,528

 

Change in fair value of derivatives

 

25,876

 

 

 

Unrealized bonds exchange differences

 

(26,486

)

 

 

Unrealized cash, cash equivalents and restricted cash exchange differences

 

2,947

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

Trade accounts receivable

 

2,772

 

 

(407

)

Prepayments and other assets

 

325

 

 

130

 

Inventories

 

(180

)

 

(125

)

Claims

 

107

 

 

85

 

Trade accounts payable

 

355

 

 

689

 

Due to related parties

 

229

 

 

(145

)

Accrued liabilities

 

995

 

 

(93

)

Deferred revenue

 

7,835

 

 

1,653

 

Dry-docking costs paid

 

 

 

(13

)

Net cash provided by operating activities

 

137,476

 

 

74,923

 

Cash flows from investing activities:

 

 

 

 

Vessel acquisitions, including time charters attached, and improvements

 

(2,518

)

 

(102,002

)

Advances for vessels under construction – related party

 

(30,000

)

 

 

Proceeds from sale of vessels, net

 

127,124

 

 

98,467

 

Net cash provided by / (used in) investing activities

 

94,606

 

 

(3,535

)

Cash flows from financing activities:

 

 

 

 

Proceeds from long-term debt

 

101,276

 

 

30,030

 

Deferred financing costs paid

 

(2,457

)

 

(663

)

Payments of long-term debt

 

(201,303

)

 

(79,383

)

Repurchase of common units

 

(4,433

)

 

(4,465

)

Dividends paid

 

(9,055

)

 

(5,639

)

Net cash used in financing activities

 

(115,972

)

 

(60,120

)

Net increase in cash, cash equivalents and restricted cash

 

116,110

 

 

11,268

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

(2,947

)

 

 

Cash, cash equivalents and restricted cash at beginning of period

 

30,987

 

 

54,336

 

Cash, cash equivalents and restricted cash at end of period

 

144,150

 

 

65,604

 

Supplemental cash flow information

 

 

 

 

Cash paid for interest

 

33,395

 

 

9,581

 

Non-Cash Investing and Financing Activities

 

 

 

 

Seller’s credit agreements

 

 

 

16,000

 

Financing arrangements assumed in connection with the acquisition of companies owning vessels

 

 

 

304,355

 

Common units issued in connection with the acquisition of companies owning vessels

 

 

 

15,277

 

Capital expenditures included in liabilities

 

832

 

 

1,048

 

Capitalized dry-docking costs included in liabilities

 

29

 

 

2,097

 

Deferred financing costs included in liabilities

 

1,124

 

 

 

Expenses for sale of vessels included in liabilities

 

1,300

 

 

1,485

 

Reconciliation of cash, cash equivalents and restricted cash

 

 

 

 

Cash and cash equivalents

 

134,453

 

 

56,604

 

Restricted cash - non-current assets

 

9,697

 

 

9,000

 

Total cash, cash equivalents and restricted cash shown in the statements of cash flows

 

144,150

 

 

65,604

 


Appendix A – Reconciliation of Non-GAAP Financial Measure
(In thousands of U.S. Dollars)
Description of Non-GAAP Financial Measure – Operating Surplus

Operating Surplus represents net income adjusted for depreciation and amortization expense, Bonds, cash and cash equivalents exchange differences, change in fair value of derivatives, sale of vessel result, amortization / accretion of above / below 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 partnership’s 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:

Reconciliation of Non-GAAP Financial Measure 
Operating Surplus

For the three-month
period ended

September 30, 2022

For the three-month
period ended

June 30, 2022

For the three-month
period ended

September 30, 2021

Partnership’s net income

58,728

 

20,418

 

11,875

 

Adjustments to reconcile net income to operating surplus prior to Capital

 

 

 

Depreciation, amortization, unrealized Bonds, cash and cash equivalents exchange differences and change in fair value of derivatives1

22,673

 

20,050

 

11,819

 

Amortization / accretion of above / below market acquired charters and straight-line revenue adjustments

3,426

 

3,388

 

2,123

 

Gain on sale of vessels

(47,275

)

-

 

-

 

Operating Surplus prior to capital reserve

37,552

 

43,856

 

25,817

 

Capital reserve

(29,704

)

(31,109

)

(14,505

)

Operating Surplus after capital reserve

7,848

 

12,747

 

11,312

 

Increase in recommended reserves

(4,818

)

(9,657

)

(9,337

)

Available Cash

3,030

 

3,090

 

1,975

 


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1 Depreciation, amortization, unrealized Bonds, cash and cash equivalents exchange differences and change in fair value of derivatives line item includes the following components:

  • Vessel depreciation and amortization;

  • Deferred financing costs and equity compensation plan amortization;

  • Unrealized Bonds exchange differences;

  • Unrealized cash, cash equivalents and restricted cash exchange differences; and

  • Change in fair value of derivatives.