Thank you for standing by, ladies and gentlemen, and welcome to the Costamare conference call on the third quarter 2014 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. (Operator Instructions). I must advise you that this conference is being recorded today, Monday, November 3, 2014. We would like to remind you that the conference call contains forward-looking statements. Please take a moment to read slide number two on the presentation, which contains the forward-looking statements. And I will now pass the floor to your speaker today, Mr. Zikos. Please go ahead, sir.

Thank you, and good morning, ladies and gentlemen. During the third quarter of the year, the company continued to deliver positive results. Recently, we acquired together with our partner, York Capital, a 1999-built, 2,500 TEU container vessel for a purchase price of $7.7million. The vessel was bought with equity and after delivery should commence a target deployment with Maersk. During the quarter, the company sold for demolition the 1987-built, 3,152 TEU containership vessel Akritas for a price of $7.3 million. The disposal resulted in an accounting gain of approximately $1.8 million. In August, we entered into a $17 million loan agreement in relation to the three second hand vessels and some other Ensenada Express, Petalidi and Padma Xpress bought with equity in the past under our joint venture agreement. Regarding our chartering arrangements, we have no ships laid up. Especially, no ships coming out of charter before year-end. Our re-chartering risk is minimized. Finally on October 3, we declared a dividend on our Series B and Series C Preferred Stock. On October 7, we declared a dividend of $0.28 per share of our common stock, payable on November 5. We continue to execute successfully on our growth strategy. We feel we are well positioned to continue to grow selectively and on healthy grounds. And now let's move to the slide presentation. On slide three, we are providing a summary of our recent transactions mentioned earlier. Last couple, we sold a vessel for demolition and booked a gain of $1.8 million. In addition, we purchased together with York, a 1999-built, 2,500 TEU vessel which we fixed on a short-term charter. We also entered into a $17 million facility in relation to the three ships originally bought with equity under our joint venture agreement. Finally during the quarter, we declared a dividend…

(Operator Instructions). And our first question comes from Ben Nolan with Stifel. Please go ahead.

Yes, thanks. Hi, Greg.

Good morning.

Good morning. My first question, I guess, is related to the market and specifically the dynamics that maybe you are seeing from your customers as it relates to ship speed. We have seen in the last month, month-and-a-half, we have seen a pretty material decline in oil prices and subsequently the prices of ship fuel. Has there been any move by any of your customers to increase the speeds of their ship because the relative economics from a consumption standpoint are a little bit more favorable than they had been?

Yes. Look, yes, we definitely have witnesses a fall in the fuel prices. I don't think however that this is something that has already been in the market. So still sort of a charter-tied differential for intermodal ships versus older tonnage. I think it is still in-place. And if the question is whether factoring in the new, also the lower fuel pries, charters mainly are opting for higher speed. I feel that I am not sure that this is still the case. We may have a long way to go.

Okay. So it's not happening on any of your vessels then?

No. I think no. We haven't seen it for the time being. Although, I guess, in any case, it will take some time but I don't think that for the time being, we have seen in the latest figures signs that take into account the lower fuel prices.

Okay, that's helpful. Along with that, you know, we have seen some what appears to be some tightening of the market, certainly over the course of the summer but it's even sort of lasted out to this far and there is a pretty low level of idle capacity in the market. We have not seen that really translate into much in the way of rate improvement. What exactly can you attribute that to? It doesn't seem like the demand for cargoes into Europe is especially robust. I know that there is some congestion issues on the West Coast but how are you seeing the market with respect to the availability of capacity and the fact that it is tight when it should be loosening?

Yes. Look, first of all, regarding the number of idle ships, you are right, this is at a very low point. It is at the region of 1.1%. I think that same period last year it was above 2%. However, from this idle capacity, close to 95% of those ships, they are owned by non-operating owners which are ship owners like us. And on top of that, there is some structural over capacity in the market. So although the number of idle ships has fallen substantially, it is still, we have not seen great improvement in charter rates. Now what we did witness over the last couple of months is that the panamax vessels which generally were hard to perform out from the market. They had reached charter rates of $10,000 or $11,000 per day, but this asset class again now seems to be softening a bit and they have returned back to $8,000 or $10,000 per day versus $11,000 some weeks ago. So overall, the structural overcapacity that still exists in the market together with the fact that almost all of those idle ships are being owned by ship owners and not by liner companies, those factors have not led us in an improved charter rate environment.

Okay and then my last question and then I will turn it over, relates to the four newbuildings that you have with the joint venture. Where do you stand with respect to getting contracts on those and maybe even more broadly speaking, could you maybe address what the appetite is at the moment that you are seeing from your customers for chartered and newbuilding tonnage? It seems like there has not been as much of that going on lately. Where do you see that market? And how do you think it relates to the four that you still have to contract?

Yes. Look, regarding our newbuildings, in total we have nine ships on order, five 14,000 TEU which have been chartered to Evergreen for 10 years and four 11,000 TEU which are not chartered yet and I guess, those are the ones you are referring to. For those ships, you know we are not in a hurry, since they have been contracted at prices that make sense and this is something that we are currently working on. But as I said, we are not in a hurry to charter them and making sure that we will try to maximize shareholder returns. I am not sure that I can say much more on that point apart from the fact that we feel quite comfortable with that investment.

Okay and what about the appetite for liners for new charter in that tonnage?

I think that, generally speaking, what we hear is that there is some appetite from liner companies to charter in vessels. There are projects. So if you are asking if the market is alive, it is definitely alive. Yes.

Okay. All right. That does it for me. I will turn it over. Thanks a lot.

Okay. Thank you.

Thank you. And the next question comes from Fotis Giannakoulis from Morgan Stanley.

Yes, good morning, Greg.

Yes, Fotis. Good morning.

I want to follow up on the last question and if you can tell us if there are any inquiries today about these vessels? Are they still without charters? And even if they are not at this point are you not in any discussion that you can reveal right now? What would be a reasonable rate or a reasonable EBITDA yield that we should expect for these vessels? Or at least a range of EBITDA yield?

Okay. With those ships, we are discussing it. We have been discussing in the market, but as I mentioned earlier, we are not in a hurry. So we will take our time in order to charter them promptly. Now regarding returns, I think that if someone looks at our previous newbuilding transactions already concluded, I think that the returns should be at around those levels in terms of EBITDA yield. However, I cannot commit you anything and I cannot say more because this is not a deal that has been closed yet. As I said, we are not in a hurry. So I am afraid I will have to stop here on that.

I understand and appreciate it. Can you remind us what was the EBITDA yield of the previous deal? And what about the duration of the contracts that you envision for this type of vessel? We saw previously 10 years but some of your peers they have concluded five years. What type of duration are you looking for?

Look, the duration is also a function of the time charter rate offered. So there could be values out there and if so from our side we can be a bit flexible. In previous transactions, these numbers are public where we had an EBITDA yield ranging from 12% to 14%. So this is something that we did in the past. However, as I said, I cannot commit to anything now and I cannot predict either, since you know, this is still a work in progress and you know, they may be varying, there may be a lot of alternatives. Also, in relation to the combination of time charter duration and the actual time charter rate offered to the client.

And regarding the debt financing, what shall we expect as a reasonable debt financing in terms of leverage and in terms of amortization and interest costs?

Yes. Again, I will have to defer. In the past, we have done newbuidlings with leverage levels ranging between 70% up to 90%, both post delivery and to delivery financing. So I think and the leverage, it is a function of the quality of the charter, of the time charter duration and mainly it is just on a cash flow basis, meaning that the cash flow from the vessel, on a standalone basis is meant to be able to service the debt and this is what we are aiming. So these are the leverage levels we have done in the past. And now regarding the cost of debt, again this is a variable that has to do with the leverage levels, with the duration but I cannot give you a specific number, but I can tell you that generally we have been quite competitive in securing commercial bank debt, both for newbuilding projects as well as for second hand vessels.

Thank you and these are sort of older deals you have signed these newbuildings some time ago. Going forward where do you see more opportunities arise? Is it going to be on the newbuilding front or on mid secondhand vessels that we have seen that you have done a few of them in the last couple of years?

Look, we look at pretty much everything, as you saw, like in this quarter, we bought like sort of 15 year old vessels at 2,500 TEU with equity for a purchase price of a bit less than $8 million. In the past, we did like 14,000 TEU newbuildings chartered out for 10 years. So I mean we can be pretty flexible regardless of age, size and tenor of employment and I think there will be opportunities in both secondhand and newbuildings.

Is there any area that you think that there is more dislocation in terms of pricing or in terms of a combination pack as meaning a combination of acquisition price and charter rates?

No, I think you can find opportunities both with vessels in the water and for ships that will be under construction. As long as someone is well-capitalized and has access to debt, also has the equity in place, whether this equity means cash on balance sheet or leveraging low level assets against a given balance sheet. So if someone has access to finance and track record, it seems that opportunities are going to exist in both of those areas.

And can you remind us right now how your acquisition capacity looks like? How much equity you have available between you and your JV? And in theory, how many assets can you buy just to have an idea of the growth potential?

Yes. Look, we have cash on balance sheet as of the end of third quarter was close to $200 million. Leaving aside some cash which is restricted upon our loan agreements and some working capital requirements, most of this can be utilized and the total result, we have five ships today which are debt free. Under our joint venture agreement with York, we have the right to invest anywhere between 25% to 49% which sort of allows us great flexibility. Now, if you factor on top of that our access to commercial bank debt, where yields can have a leverage of 50%, up to 80% or 90%, I think the opportunity for container shipping is quite important. I am not willing to give a specific number because this is subject to leverage levels and to our equity participation or to our shareholding in this single transaction, which may vary. However, I don't think the issue at Costamare is the funding or the availability of equity, quite the opposite. The thing is that we are trying to find transactions which are going to be using attractable returns for our shareholders.

And one last question and I will hand it over. We have seen the previous months together with the volatility in the financial markets your stock price dropping similar to any other shipping stocks and sometimes because of the limited fleet load even harder. What are your thoughts about the stock price? And if there are any discussions about share buyback programs? And how do you view capital allocation between share buybacks, dividend increases and additional vessel acquisitions?

Yes. First of all, regarding the stock price, you are right to think, together with the rest of the market and together with the rest of the industry, the Costamare stock followed. However, in one single day, we witnessed a fall which was over and above what someone could expect. Bear in mind, the company's financial and that nothing has changed, neither financially nor operationally in the company. However, since then, I think the stock has recovered. We still feel that in today's environment a dividend yield offered by the Costamare stock, it is quite high and attractive, bearing in mind the sustainability and quality and the upside of that dividend. However most of the losses, you know, into those -- during those days have been recovered. Now going forward, we like dividends and think we feel we are already rate sensitive twice. And I think, you know, we will be more than happy to raise it in the future after a transaction which are going to be providing us additional visible cash flows. All-in-all, we will have some events that would justify a dividend increase. Let's not forget that the founding family today owns close to 65% of the company, so we have a 100% aligned interest. We have no other shipping assets outside of Costamare Inc. Now, the share buyback, it is also another tool which is going to be helping our shareholders in compensating our shareholders. In case that the stock is trading below its levels, so that the EPS per share is going to be going up. This is something we will be evaluating as well Now, it is difficult to have and it is in line between acquisitions and growth, share buybacks and dividend increases. However, I think that going forward, regarding the share buyback and the dividend increases, this is something we are currently discussing. The acquisitions and the growth, I think, needless to say that in today's environment, we are not sellers, we are buyers and that we will continue expanding as long as we see transactions that make sense.

Thank you, Greg.

Sure. Thank you.

Thank you. And the next question comes from Mark Suarez from Euro Pacific Capital.

Hi, there. Good morning, guys.

Yes. Hi, Mark. Good morning.

Greg, you know, over the past few quarters, we have seen you guys sell older assets to then reinvest that and use that equity into newer sub-panamaxes as with in the JV with York. And I am wondering we should expect more of the same within the secondhand market? And if so, is the focus right now in the sub-panamax segment for these types of investments within the JV?

Yes. Look, it's the vessel that we sold, the Akritas. It is a ship which was like a 1987-built and bearing in mind where demolition price is our, I think it made sense to free up some equity from that asset. And we bought for $7.7 million a ship which was like 12 years younger for a price that it is $2.5 million to $3 million above scrap which we have already fixed under short term charter contract. And in the past, I mean over the last three years, we have done a lot of transactions where we have sold for demolition older assets at relatively high scrap prices and we have used that equity in order to renew the fleet. This is not something uncommon. And you know, should there be more opportunities, we might continue doing that. The thing with those deals is that, by default they are operatively small amounts. So it's not a newbuilding transaction where you may be using $0.5 billion of CapEx commitment. These are transactions which would be like $5 million, $10 million, $15 million up to $20 million worth. However, those are deals that can generate very high returns and we see no reason why not to renew the fleet by taking benefit -- by benefiting from high scrap prices and low secondhand values.

Okay. So is my sense here correct that the sub-panamax segment is actually offering some very attractive opportunities? And as you go into the market, are you seeing a lot of chartered attached transactions? Or the potential for those transactions? Just wondering what percent of the market it is? (inaudible).

Yes. Well, it's not only the panamax vessel. I mean this is like, when we bought it, it was like 2,500 TEU ship. It's a sub-panamax but it could also be ships like 6,500 TEUs which could be of the same nature. It's not that we targeted a specific asset size. I think we look at the fuel economics of the transaction. Now going forward, we are quite open to selling these bad transaction to charter or this type of acquisitions. We just bought this vessel, the Elafonisos. We bought it charter free and we have to arrange the charter separately. It was not in any type of charter. But we are pretty open to whatever can generate share return.

Okay and just turning into sort of the macro picture for a second. I know in your opening remarks you talked about charter rates. I know that panamax rates have actually increased and then of course went back down and this went to $11,000 due to accelerated scrapping. Now if you look at the sub-panamax category, are you beginning to see the same trend where maybe premature scrapping is now becoming the norm vis-à-vis the historical trend?

Look, for the very small ships in the 2,000 to 3,000 TEUs, the charter rates for some asset classes, they are quite low level and I am not sure how much below they can go, bearing in mind that some of the ships are operating today at very close to breakeven. Some of those vessels could be either be scrapped, or they could be laid up in to the charter rates. We are not going to be forcing the ship owners to operate at a loss. So in that category, I don't think there is much more room for lower levels. We have some ships that are trading at $5,000 to $6,000 per day and these are rates that ship owners may not be able to service promptly debt requirements from the assets.

Got you, and then just going back to your income statement here, your vessel operating expenses. I think you have done a pretty good job since the beginning of the year at controlling those costs. I am wondering what is behind that range we have seen at around $6,000, $6,100 range. Do you think that is a good run rate as we head into 2015?

During the quarter, I think we have the average daily operates in the region of $6,000 and some dollars per day. Let's not forget that in 25 of our ships, or more or less, we are flying the Greek flag and the Greek flag also means expenses in Euros. Now we have some favorable FX movements over the last months and this is something that may have helped as well. However, it doesn't mean that we don't try to make sure that our operating expenses, although we fly the Greek flag, which is much more expensive than some other countries and their flags. We try to make sure that our OpEx are quite competitive bearing in mind the size of the fleet and our average vessel size. Our average vessel size is above 5,000 TEUs. So $6,000 per day for an above 5,000 TEU vessel flying the Greek flag, I think in today's environment, it is quit a competitive rate. Now going forward, I cannot claim that this is something, the $6,000 per day is a number that will be there forever. We have a budget. We have performed regular to budget. However, I think in order to be conservative and prudent, I would focus on the budget rather than on the figure that has to do with the third quarter of the year.

Okay. That's helpful. And then my last question here, and I think you already mentioned this, with regards to potential dividends for share buybacks. At what point do you think the Board will consider specifically raising dividends again? Do you think it will primarily depend on the pace of acquisitions? Or do you have like a cash level beyond that is required once you account for those transactions you want to accomplish over the next 12 to 18 months? I am just trying to get a sense of what sort of benchmarks is the Board looking at before they can switch the dividend up again?

Yes. First of all, this is a question that's only the Board qualified to answer. However, if I were to ask what, you know, management would recommend I think that management would recommend that after a transaction or after a conclusion of the transaction which is going to resulting in substantial increment of cash flows, with duration of some years, then I think it would be proper, for instance, to reward our shareholders with a third dividend increase, for instance.

Okay. That's fair enough. Thanks for your time again, Greg.

Don't worry about it. Thanks.

Thank you. And the next question comes from Shawn Collins with Bank of America

Great. Hi, Greg. Good afternoon.

Yes. Hi, Shawn. Hi, good morning.

Thank you. Greg, can you just talk about what percentage of the fleet is coming up for re-chartering after the next 12 months? Say, in year two and three? And how you are thinking about this?

Yes. I mean I will tell you on a TEU percentage. By the end of 2015, the coverage is going to be 83% and by the end of 2016, it's going to be at around 70%. However, only by looking at the TEU coverage may be misleading. So I will have to refer you our slide seven of the presentation, because I mean all we care about and I guess we are saying is going to be applying for our investors is use of cash. So although we have six operating cost in the next year, their cash generating capacity is relatively low compared to the backbone of the fleet which is chartered for a long period. So I mean if you go to chart to slide seven, you will see that we have done an exercise and starting from the end of the third quarter of this year. So this is a period from September 30, 2014 to September 30, 2015. Before ships come out of charter during those 12 months are being re-chartered at, let's say, 30% discount, which means that the new fixed is going to be 70% of the today's figure, then the change in the yearly EBITDA on the percentage basis is going to be in the region of 1.6%. So one way to look at the coverage is to focus on TEUs opening, but also you have to see what's going to be the cost effect if ships coming out of charter are going to be re-chartered at a lower rate. Now I don't want to be misinterpreted. I am not saying that the ships coming out of charter will be chartered at lower rates, because we don't know where the market will be in terms of time. All I am saying is that if someone wants to discuss what is the downside for the vessels opening in 2015, one should look in slide seven in order to assess the downside in cost EBITDA terms.

Okay, great. That's very helpful. I appreciate that. That's insightful and instructive to look at it that way. Second question. Can you just comment on the current status and dynamic that you have with your customers, the liner companies and how you feel about that? And your view on the future, as to the ownership of container ships between the liners and the containership companies? And do you think that will stay consistent? Or change over time, say, over the next five years?

I think that, look, liner companies they have been traditionally relying on ship owners like us to secure part of their tonnage. So as an example, 50% of the liner fleet is old and 50%, it is provided on a time charter basis by a third party non-operating ship owner. And line companies, that way they are retaining operational flexibility, meaning that at the expiry of the time charter they can redeliver the ship to the ship owner and also some financial flexibility because those assets up to now are at rates they are not recorded in their books. Now we normally don't predict the future, however, I don't see why this is something that will be changing in the near or short term. Bearing in mind, that liner companies feel they want to retain some operational flexibility and it may not be optimal to own 100% of the assets they operate.

Okay, great. Thanks for that color, Greg. Just one last quick question. Just on the new Euro bank facility, the $17 million piece as part of the JV entity. Can you say what the margin is for that over LIBOR? Just to get a sense on where the bank market is? And I am assuming it remains open and accommodative?

Well, this is something we have not disclosed and I am afraid I cannot disclose it now. I can tell you, however, that this may not be a good proxy regarding other bank debt because here you talk about all the tonnage with relatively short time charter coverage versus, say for instance, a commercial bank debt that has to do with pre-delivery financing of newbuildings that are chartered for or chartered out for 10 years. So you talk about a completely different type of financing structure. However, I can tell you that for those vessels and Costamare has been able to secure a bank debt for ships that may be 10, 12 or 15 years old or even older with commercial banks. But I am afraid that I wouldn't be able to disclose the margin at this point in time and this is something that I am not sure that the financing bank would be willing us to disclose it either.

Okay, I understand, Greg. No worry. Thank you for the time and for the commentary. I appreciate it.

Okay, Shawn. Thank you.

Thank you. (Operator Instructions). All right. There are no more questions at the present time. So I would like to turn the call back over to Mr. Zikos for any closing comments.

Yes. Thank you for being here with us today. Going forward, our goal is to continue to deliver superior shareholder returns. Looking forward to speaking with you again at our year-end results. Thank you.

Thank you. That does conclude our conference for today. Thank you all for participating. You may now disconnect.