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Euroseas Ltd. Navigates Tranformative Period Successfully

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, 2019.

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 the 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. of vessels spun-off into EuroDry Ltd. in May 2018 (“discontinued operations”) from historical comparative periods which have been adjusted accordingly.

Second Quarter 2019 Highlights:

Total net revenues of $8.1 million. Net loss of $0.7 million and net loss attributable to common shareholders (after a $0.48 million dividend on Series B Preferred Shares and a $0.5 million preferred deemed dividend) of $1.7 million or $0.14 loss per share basic and diluted. Adjusted net loss attributable to common shareholders1 for the period was $1.8 million or $0.14 per share basic and diluted.

Adjusted EBITDA1 was $1.6 million.

An average of 11.00 vessels were owned and operated during the second quarter of 2019 earning an average time charter equivalent rate of $8,307 per day.

The Company declared its second cash dividend of $0.48 million on its Series B Preferred Shares.

As already announced the Company proceeded with the redemption of approximately $11.7 million, or about 59.4%, of its outstanding Series B Preferred Shares with simultaneous reduction of 4% of the dividend rate for the $8 million value of preferred shares remaining outstanding until January 2021.
First Half 2019 Highlights:

Total net revenues of $16.4 million. Net loss of $0.8 million; net loss attributable to common shareholders (after a $0.95 million of dividend on Series B Preferred Shares and a $0.5 million preferred deemed dividend) of $2.2 million or $0.18 loss per share basic and diluted. Adjusted net loss attributable to common shareholders1 for the period was $2.3 million or $0.18 per share basic and diluted.

Adjusted EBITDA1 was $3.0 million.

An average of 11.00 vessels were owned and operated during the first half of 2019 earning an average time charter equivalent rate of $8,693 per day.

Completion of vessel acquisitions announced in June 2019:

Euroseas also announced that it completed the acquisition of the four feeder containerships, owned by affiliates of the Pittas family, controlled by the Company’s CEO that was announced in June 2019 for a consideration that includes a cash payment of $15 million and issuance of approximately 22.5 million shares of common stock to the sellers. Euroseas financed the cash portion of the acquisition price via the arrangement with two bank loans drawing a total of $16.5 million with the excess amount to be used for general corporate purposes. The cash portion of the acquisition price was used to repay the existing indebtedness of the vessels with the sellers receiving only payment in Euroseas common shares. The common shares issued to the sellers represent approximately 64.3% of Euroseas’ outstanding common shares. As announced, the vessels acquisition transactions were evaluated and approved by a special committee of independent members of the Board of Directors.

The four vessels, M/V EM Hydra and EM Spetses, both 1,700 teu feeder containership built in 2005 and 2007, respectively, EM Kea, a 3,100 teu feeder containership built in 2007, and the M/V Diamantis P, a 2,008 teu feeder vessel built in 1998, represent a significant expansion of Euroseas’ fleet both in terms of units and value. All four vessels have been delivered to the Company, the first two on August 2, 2019 and the two remaining on August 7, 2019. After the acquisition of the four vessels, Euroseas fleet consists of 15 container vessels with all the vessels except for one being feeder containerships.

Eligible for extension of time to comply with NASDAQ minimum bid price requirement

As previously announced, Euroseas received notice from the Nasdaq Stock Market LLC (“Nasdaq”) dated January 14, 2019 (the “Notice”) indicating that the Company is no longer in compliance with Nasdaq’s continued listing requirements under Nasdaq Listing Rule 5550(a)(2) because the closing bid price of the Company’s common stock over a period of 30 consecutive business days was less than $1.00 per share.

Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company had originally six months following receipt of the notification to regain compliance with the minimum share price requirement. However, NASDAQ has determined that the Company is eligible for an additional 180 calendar day period, or until January 13, 2020, to regain compliance.

The Company can cure this deficiency if the closing bid price of its common stock is $1.00 per share or higher for at least ten consecutive business days during the six months following the date of the Notice. Alternatively, the Company could also take other actions to cure the deficiency, such as a reverse stock split which Euroseas intends to do if necessary and for which it has already received shareholder approval. During this time, the Company’s common stock will continue to be listed and trade on the Nasdaq Capital Market. The Company’s business operations are not affected by the receipt of the Notice.

Aristides Pittas, Chairman and CEO of Euroseas commented: “The second quarter of 2019 was a transformative period for Euroseas in several respects. Firstly, we restructured the capital structure by repaying about 60% of our preferred equity which commanded a 12% dividend while for the 40% of our preferred equity amount that remained outstanding reached an agreement to reduce it to 8% until January 2021; and secondly, we increased and renewed our fleet by including into Euroseas four affiliate-owned vessels by issuing common stock and raising bank debt. The latter transaction represents another step to using Euroseas and its public listing as a platform of consolidation for other containership fleets.

“On the market front, rates for feeder and intermediate containerships should firm up in the near and medium term following the recent strength of rates of larger vessels where in addition to limited supply growth, effects from the preparation for compliance with the low sulfur emissions requirement further reduce vessel availability. However, the recent flare up of trade tensions between U.S. and China could undermine the otherwise promising prospects by limiting trade growth. Our focus remains on ensuring that vessels remain employed and available to benefit from a possible market strengthening. In that context, too, we are looking to replace some of our elder units with younger ones, should such an opportunity present.”

Tasos Aslidis, Chief Financial Officer of Euroseas commented: “The results of the second quarter of 2019 reflect the decreased levels of the containership markets compared to the same period of 2018.

Adjusted EBITDA during the second quarter of 2019 was $1.6 million versus $2.3 million in the second quarter of last year. As of June 30, 2019, our outstanding debt (excluding the unamortized loan fees) was $40.2 million versus restricted and unrestricted cash of $4.0 million. As of the same date, our scheduled debt repayments over the next 12 months amounted to about $5.1 million (excluding the unamortized loan fees).

“Total daily vessel operating expenses, including management fees, general and administrative expenses but excluding drydocking costs, averaged $6,423 per vessel per day during the second quarter of 2019 as compared to $6,278 per vessel per day for the same quarter of last year, and $6,324 per vessel per day for the first half of 2019 as compared to $6,543 per vessel per day for the same period of 2018, reflecting a 2.3% increase and a 3.3% decrease, respectively, which is attributed to the different composition of 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 2019 Results:
For the second quarter of 2019, the Company reported total net revenues of $8.1 million representing a 17.1% decrease over total net revenues of $9.8 million during the second quarter of 2018 which was a result of the decreased average number of vessels and the decrease in the average time charter rate our vessels earned. The Company reported net loss for the period of $0.7 million and net loss attributable to common shareholders of $1.7 million, as compared to a net income of $2.2 million and a net income attributable to common shareholders of $1.8 million, respectively, for the same period of 2018. Drydocking expenses amounted to $0.2 million during the second quarter of 2019 as a vessel passed its intermediate survey in water. Depreciation expenses for the second quarter of 2019 amounted to $0.80 million compared to $0.84 million for the same period of 2018. Vessel operating expenses were $5.0 million in the second quarter of 2019 as compared to $5.3 million for the second quarter of 2018, mainly due to the decreased average number of vessels operated. Other general and administrative expenses amounted to $0.66 million for the second quarter of 2019 marginally higher compared to $0.63 million for the second quarter of 2018. On average, 11.00 vessels were owned and operated during the second quarter of 2019 earning an average time charter equivalent rate of $8,307 per day compared to 11.95 vessels in the same period of 2018 earning on average $10,028 per day.

Interest and other financing costs for the second quarter of 2019 amounted to $0.8 million compared to $0.7 million for the same period of 2018. Interest during the second quarter of 2019 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 2019 was $1.6 million compared to $2.3 million achieved during the second quarter of 2018. Please see below for Adjusted EBITDA reconciliation to net income/ (loss).

Basic and diluted loss per share attributable to common shareholders for the second quarter of 2019 was $0.14 calculated on 12,340,060 basic and diluted weighted average number of shares outstanding, compared to basic and diluted earnings per share of $0.16 for the second quarter of 2018, calculated on 11,133,764 basic and diluted weighted average number of shares outstanding.

Excluding the effect on the loss attributable to common shareholders for the quarter of the unrealized gain on derivative and the gain on sale of vessel, the adjusted net loss per share attributable to common shareholders for the quarter ended June 30, 2019 would have remained unchanged, compared to adjusted earnings of $0.03 per share basic and diluted for the quarter ended June 30, 2018. Usually, security analysts do not include the above items in their published estimates of earnings per share.

First Half 2019 Results:
For the first half of 2019, the Company reported total net revenues of $16.4 million representing a 9.0% decrease over total net revenues of $18.1 million during the first half of 2018, as a result of the decreased average number of vessels and the decrease in the average time charter equivalent rate our vessels earned. The Company reported net loss for the period of $0.8 million and net loss attributable to common shareholders of $2.2 million, as compared to a net income of $0.8 million and a net loss attributable to common shareholders of $0.1 million respectively, for the first half of 2018. Depreciation expenses for the first half of 2019 were $1.6 million compared to $1.7 million during the same period of 2018. On average, 11.00 vessels were owned and operated during the first half of 2019 earning an average time charter equivalent rate of $8,693 per day compared to 11.97 vessels in the same period of 2018 earning on average $9,228 per day.

Interest and other financing costs for the first half of 2019 amounted to $1.5 million compared to $1.3 million for the same period of 2018. This increase is due to the increased amount of debt and increased LIBOR in the current period compared to the same period of 2018.

Adjusted EBITDA for the first half of 2019 was $3.0 million compared to $2.3 million achieved during the first half of 2018. 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 2019 was $0.18, calculated on 12,340,060 basic and diluted weighted average number of shares outstanding compared to basic and diluted loss per share of $0.01 for the first half of 2018, calculated on 11,133,764 basic and diluted weighted average number of shares outstanding.

Excluding the effect on the loss attributable to common shareholders for the first half of the year of the unrealized gain 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, 2019 remained unchanged, compared to adjusted net loss of $0.14 per share basic and diluted for the same period in 2018. Usually, security analysts do not include the above items in their published estimates of earnings per share.
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Source: Euroseas Ltd.

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