Financial Performance - Total revenues for 2018 were $279,254,000, an increase of 12.1% from $249,115,000 in 2017[42] - Operating income decreased to $26,275,000 in 2018 from $64,296,000 in 2017, representing a decline of 59.1%[42] - The net loss attributable to common unit holders for 2018 was $(10,994,000), compared to a net income of $26,860,000 in 2017[43] - Total operating expenses increased to $252,979,000 in 2018, up from $184,819,000 in 2017, marking a rise of 36.8%[42] - Cash flow from operating activities was $97,890,000 in 2018, down from $126,974,000 in 2017, a decrease of 22.9%[43] Assets and Liabilities - Fixed assets at the end of 2018 were valued at $1,229,782,000, a decrease from $1,265,196,000 in 2017[43] - Total assets decreased to $1,385,245,000 in 2018 from $1,466,216,000 in 2017, a decline of 5.5%[43] - Total long-term liabilities were $388,772,000 at the end of 2018, down from $409,740,000 in 2017[43] - The company has total debt of $445.9 million as of December 31, 2018, with all debt consisting of bank loans under the 2017 credit facility[181] Vessel Operations and Impairments - The company recognized an impairment charge of $3.3 million related to the disposal of the M/T Aristotelis, reducing the vessel's carrying value to $28.9 million[9] - The company recognized an impairment charge of $28.8 million related to the disposal of the M/T Amore Mio II, reducing the vessel's carrying value to $10.9 million[12] - The company currently owns 11 vessels, consisting of ten neo panamax container vessels and one drybulk vessel, with potential plans to re-enter the tanker market[48] - The fleet consists of 11 vessels with an average age of approximately 6.7 years as of December 31, 2018, with two container vessels built in 2006 and 2007, and one drybulk vessel built in 2010[137] Market Conditions and Competition - The container shipping industry is cyclical and volatile, with charter rates having declined sharply since their peak in 2005, affecting profitability[52] - The drybulk shipping industry is cyclical and volatile, affecting charter rates, vessel values, and profitability[80] - The company faces substantial competition in obtaining new long-term time charters on containerships, which involves an intensive screening process and competitive bids[75] - The company faces intense competition from larger shipping companies, which may offer lower charter rates, affecting profitability[92] Chartering and Revenue Risks - The company relies on a limited number of charterers for all revenues, increasing exposure to revenue loss if any charterer defaults[109] - The current charter for the M/V Cape Agamemnon is set to expire in June 2020, and failure to secure a new charter could lead to reliance on the more volatile spot market[91] - The charter rates for certain vessels are at a substantial premium compared to current market rates, and any failure by charterers could result in significant revenue loss[100] Regulatory and Compliance Issues - The company incurs significant costs to comply with the U.S. Sarbanes-Oxley Act, which requires annual evaluations of internal control over financial reporting[221][222] - The company has contracted $19.5 million for scrubbers to comply with MARPOL Annex VI, with expected payments of $10.7 million, $7.2 million, and $1.6 million in 2019, 2020, and 2021 respectively[228] - Future legislation regarding environmental matters is expected to impose additional compliance costs and operational changes[235][237] - The shipping industry is expected to face increasingly stringent regulations due to marine accidents, which may lead to higher operational costs for the company and its competitors[238] Financial Stability and Debt Management - The company must maintain a minimum free consolidated liquidity of at least $500,000 per collateralized vessel under its 2017 credit facility[186] - The company is subject to a maximum leverage ratio of 0.750, defined as total net indebtedness to total assets[186] - Default under the 2017 credit facility could impair the company's ability to make cash distributions and may result in the loss of rights to certain vessels and their charters[191] - If cash flows are insufficient to meet service payments, the company may need to refinance or replace its existing debt, which may not be possible[193] Environmental and Operational Risks - Increased costs related to crewing, insurance, and security measures may reduce earnings and cash flows[121] - The company faces risks from operational hazards that could lead to unexpected drydocking costs and delays[135] - Political instability and terrorist attacks could adversely affect operations and financial condition, particularly in regions where the company operates[156] - Increases in fuel prices can significantly impact profitability, especially when vessels are trading in the spot market or during drydocking[160] Future Outlook and Strategic Considerations - The company must effectively manage growth and identify new markets to capitalize on opportunities, which is critical for financial stability[96] - The company’s ability to expand relationships with existing charterers and develop new ones is crucial for growth and re-chartering its containerships[75] - The potential impact of these regulations could adversely affect the company's financial condition, operating results, and ability to make cash distributions[238]
Capital Product Partners L.P.(CPLP) - 2018 Q4 - Annual Report