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Euroseas Ltd. Hails Containership Market Recovery

Euroseas Ltd., an owner and operator of container carrier vessels and provider of seaborne transportation for containerized cargoes, announced its results for the three and six month period ended June 30, 2018.

The Spin-off

On May 30, 2018, the Company spun-off its drybulk fleet (excluding M/V Monica P, a handymax drybulk carrier, which was agreed to be sold) into EuroDry Ltd., a separate publicly listed company also listed on NASDAQ Capital Market. Shareholders of the Company received one EuroDry Ltd. share for every five shares of the Company they held. As a result of the spin-off and the subsequent sale of M/V Monica P, the Company has become a pure containership company and the only publicly listed company concentrating on the feeder containership sector.

The results below refer to Euroseas Ltd. “continuing operations” excluding the contribution from Euroseas Ltd.’s vessels spun-off into EuroDry Ltd. in May 2018 (“discontinued operations”) unless otherwise noted; historical comparative periods have been adjusted accordingly.

Second Quarter 2018 Highlights:

Total net revenues of $9.8 million. Net income of $2.1 million and net income attributable to common shareholders (after a $0.39 million dividend on Series B Preferred Shares) of $1.8 million or $0.16 earnings per share basic and diluted. Adjusted net income attributable to common shareholders1 for the period was $0.5 million or $0.04 per share basic and diluted.

Adjusted EBITDA was $2.4 million.

An average of 11.95 vessels were owned and operated during the second quarter of 2018 earning an average time charter equivalent rate of $10,028 per day.

The Company declared its eighteenth dividend of $0.4 million on its Series B Preferred Shares; the dividend was paid in-kind by issuing additional Series B Preferred Shares. On May 30, 2018 Euroseas redeemed 50% of its Series B Preferred Stock using shares of EuroDry Ltd.’s Series B Preferred Stock alongside the spin-off of the latter. The dividend paid for the second quarter reflects dividend on the all the shares of its Series B Preferred Stock up to May 30, 2018 and on the shares that remained after the redemption since May 30, 2018 to the end of the quarter.

First Half 2018 Highlights:

Total net revenues of $18.1 million. Net income of $0.7 million; net loss attributable to common shareholders (after a $0.85 million of dividend on Series B Preferred Shares) of $0.1 million or $0.01 loss per share basic and diluted. Adjusted net loss per share attributable to common shareholders1 for the period was $1.4 million or $0.13 per share basic and diluted.

Adjusted EBITDA1 was $2.4 million.

An average of 11.97 vessels were owned and operated during the first half of 2018 earning an average time charter equivalent rate of $9,228 per day.

Aristides Pittas, Chairman and CEO of Euroseas commented:

“In the second quarter of 2018, we achieved a significant milestone in executing our strategy by completing the spin-off of six of our drybulk vessels into EuroDry Ltd., a shipping company also listed on NASDAQ. We are pleased to see that our shareholders benefited by having the market value of their combined EuroDry Ltd. and Euroseas holdings increase by more than 40% as a result of the spin-off. Separately, we sold the only remaining drybulk vessel we owned and, thus, Euroseas has become the only publicly listed company focused on the feeder containership sector.

During the second quarter, the containership market continued its recovery. Although charter rates peaked in early May and have softened since, they remain at levels noticeably higher than their respective periods of last year. Expectations for continued economic growth across many developed and developing countries and low levels of orderbook support our guarded optimism that charter rates, especially for feeder vessels, will further improve in the latter part of the year and in 2019, provided that U.S. induced trade wars do not escalate significantly. Thus, we have been fixing our vessels that open up for recharter for periods between 3-12 months at profitable levels but also aiming to have staggered renewal periods to be able to participate further in the strengthening market which we anticipate.

“We remain focused at growing Euroseas to a significant publicly listed consolidating platform for the feeder containership sector. We continuously evaluate investment opportunities of either individual vessels or fleets that could be accretive to our shareholders.”

Tasos Aslidis, Chief Financial Officer of Euroseas commented: “The results of the second quarter of 2018 reflect the improving levels of the containership markets compared to the same period of 2017.

“Adjusted EBITDA during the second quarter of 2018 was $2.4 million versus $0.6 million in the second quarter of last year. As of June 30, 2018, our outstanding debt (excluding the unamortized loan fees) was $32.7 million versus restricted and unrestricted cash of $13.6 million. As of the same date, our scheduled debt repayments over the next 12 months amounted to about $11.8 million (excluding the unamortized loan fees) of which $7.9 million is a balloon payment for one of our loans which we expect to be able to refinance.

“Total daily vessel operating expenses, including management fees, general and administrative expenses but excluding drydocking costs, averaged $6,278 per vessel per day during the second quarter of 2018 as compared to $6,220 per vessel per day for the same quarter of last year, and $6,543 per vessel per day for the first half of 2018 as compared to $6,055 per vessel per day for the same period of 2017, reflecting a 0.9% and 6.4% increase, respectively, which is attributed to the different composition our fleet during the periods. As always, we want to emphasize that cost control remains a key component of our strategy. We are in compliance with all our loan covenants.”

Second Quarter 2018 Results:

For the second quarter of 2018, the Company reported total net revenues of $9.8 million representing an 85.0% increase over total net revenues of $5.3 million during the second quarter of 2017 which was a result of the increased average number of vessels and the increase in the average time charter rate our vessels earned. The Company reported net income for the period of $2.1 million and net income attributable to common shareholders of $1.8 million, as compared to a net loss of $0.8 million and a net loss attributable to common shareholders of $1.2 million, respectively, for the same period of 2017. The results for the second quarter of 2018 include a $1.3 million gain on sale of a vessel. Drydocking expenses amounted to $0.4 million during the second quarter of 2018 as a vessel underwent drydocking. Depreciation expenses for the second quarter of 2018 amounted to $0.8 million compared to $1.0 million for the same period of 2017. Although the average number of vessels increased, one vessel which was held for sale during the second quarter of 2018 did not contribute to the depreciation charge and the new vessels acquired have a lower average daily depreciation charge as a result of their lower acquisition cost and greater remaining useful life compared to the remaining vessels. Vessel operating expenses were $5.3 million in the second quarter of 2018 as compared to $3.4 million for the second quarter of 2017 due partly to the increased average number of vessels operated and higher costs for lubricants and other supplies paid. Other general and administrative expenses amounted to $0.63 million for the second quarter of 2018 marginally higher compared to $0.66 million for the second quarter of 2017. On average, 11.95 vessels were owned and operated during the second quarter of 2018 earning an average time charter equivalent rate of $10,028 per day compared to 8.12 vessels in the same period of 2017 earning on average $7,428 per day.

Interest and other financing costs for the second quarter of 2018 amounted to $0.7 million compared to $0.4 million for the same period of 2017. Interest during the second quarter of 2018 was higher due to higher debt and increased LIBOR during the period as compared to the same period of last year.

Adjusted EBITDA for the second quarter of 2018 was $2.4 million compared to $0.6 million achieved during the second quarter of 2017. Please see below for Adjusted EBITDA reconciliation to net income/ (loss).

Basic and diluted earnings per share attributable to common shareholders for the second quarter of 2018 were $0.16 calculated on 11,133,764 basic and diluted weighted average number of shares outstanding, compared to basic and diluted loss per share of $0.11 for the second quarter of 2017, calculated on 11,061,612 basic and diluted weighted average number of shares outstanding.

Excluding the effect on the earnings attributable to common shareholders for the quarter of the unrealized gain and realized loss on derivative, and the gain on sale of a vessel, the adjusted net earnings per share attributable to common shareholders for the quarter ended June 30, 2018 would have been $0.04 per share basic and diluted compared to adjusted net loss of $0.11 per share basic and diluted for the quarter ended June 30, 2017. Usually, security analysts do not include the above items in their published estimates of earnings per share.

First Half 2018 Results:

For the first half of 2018, the Company reported total net revenues of $18.1 million representing a 76.3% increase over total net revenues of $10.2 million during the first half of 2017, as a result of the increased average number of vessels and the increase in the average time charter equivalent rate our vessels earned. The Company reported net income for the period of $0.7 million and a net loss attributable to common shareholders of $0.1 million, as compared to net loss and net loss attributable to common shareholders of $2.1 million and $3.0 million respectively, for the first half of 2017. The results for the first half of 2018 include a $1.3 million gain on sale of a vessel, as compared to a $0.5 million gain on sale of a vessel for the same period of 2017. Depreciation expenses for the first half of 2018 were $1.7 million compared to $1.9 million during the same period of 2017. Although the average number of vessels increased, one vessel which was held for sale during the first half of 2018 did not contribute to the depreciation charge and the new vessels acquired have a lower average daily depreciation charge as a result of their lower initial values (acquisition price) and greater remaining useful life compared to the remaining vessels. On average, 11.97 vessels were owned and operated during the first half of 2018 earning an average time charter equivalent rate of $9,228 per day compared to 8.38 vessels in the same period of 2017 earning on average $6,918 per day.

Interest and other financing costs for the first half of 2018 amounted to $1.3 million compared to $0.7 million for the same period of 2017. This increase is due to the increased amount of debt and increased LIBOR in the current period compared to the same period of 2017.

Adjusted EBITDA for the first half of 2018 was $2.4 million compared to $(0.1) million achieved during the first half of 2017. Please see below for Adjusted EBITDA reconciliation to net income/ (loss).

Basic and diluted loss per share attributable to common shareholders for the first half of 2018 was $0.01, calculated on 11,133,764 basic and diluted weighted average number of shares outstanding compared to basic and diluted loss per share of $0.28 for the first half of 2017, calculated on 11,030,754 basic and diluted weighted average number of shares outstanding.

Excluding the effect on the income/ (loss) attributable to common shareholders for the first half of the year of the unrealized (gain) /loss and realized (gain) /loss on derivative and the gain on sale of vessel, the adjusted net loss per share attributable to common shareholders for the six-month period ended June 30, 2018 would have been $0.13 compared to a loss of $0.32 per share basic and diluted for the same period in 2017. Usually, security analysts do not include the above items in their published estimates of earnings per share.
Full Report

Source: Euroseas Ltd.

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