Euroseas posts $0.93m loss amid higher expenses

Euroseas_Pittas

Euroseas, an owner and operator of container carrier vessels and provider of seaborne transportation for containerized cargoes, announced its results for the three month period and full year ended December 31, 2019.

Fourth Quarter 2019 Highlights:

  • Total net revenues of $13.3 million. Net loss of $0.8 million; net loss attributable to common shareholders (after a $0.2 million dividend on Series B Preferred Shares) of $0.9 million or $0.18 loss per share basic and diluted. Adjusted net loss attributable to common shareholders1 for the period was $1.6 million or $0.321 per share basic and diluted.
  • Adjusted EBITDA1 was $1.2 million.
  • An average of 16.8 vessels were owned and operated during the fourth quarter of 2019 earning an average time charter equivalent rate of $9,086 per day.
  • During the fourth quarter, the Company took delivery of four intermediate containerships, owned by Synergy Holdings Ltd. The consideration for the acquisition of approximately $40 million was financed by bank debt of $32 million, existing funds of the Company and $6 million raised in private placements, subscribed equally by an entity affiliated with the Company’s CEO and an entity controlled by the seller of the four vessels.  The four vessels, each with a capacity of 4,250 teu, (three built in 2009 and one in 2008), represent a significant expansion of Euroseas’ fleet both in terms of units and value.
  • Finally, the Company declared its fourth cash dividend of $0.16 million on its Series B Preferred Shares.

Full Year 2019 Highlights:

  • Total net revenues of $40.0 million. Net loss of $1.7 million; net loss attributable to common shareholders (after a $1.3 million dividend on Series B Preferred Shares and a $0.5 million preferred deemed dividend arising out of the redemption of approximately $11.7 million of Series B Preferred Shares in the second quarter of 2019) of $3.5 million or $1.21 loss per share basic and diluted. Adjusted net loss per share attributable to common shareholders1 for the year was $4.4 million or $1.521 per share basic and diluted.
  • Adjusted EBITDA1 was $5.3 million.
  • An average of 13.1 vessels were owned and operated during the twelve months of 2019 earning an average time charter equivalent rate of $8,782 per day.

1Adjusted EBITDA, Adjusted net loss and Adjusted loss per share are not recognized measurements under U.S. GAAP (GAAP) and should not be used in isolation or as a substitute for Euroseas financial results presented in accordance with GAAP. Refer to a subsequent section of the Press Release for the definitions and reconciliation of these measurements to the most directly comparable financial measures calculated and presented in accordance with GAAP.

Aristides Pittas, Chairman and CEO of Euroseas commented:
“During the fourth quarter of 2019 and early 2020, containership time charter rates have held their levels despite broader concerns about global economic growth and still existing, although de-escalating, trade tensions between the U.S. and China. The year registered (on a preliminary basis) one of the lowest growth rates in the containerized trade. In January 2020, new uncertainties were introduced in the marketplace by the coronavirus epidemic and its potential effects on world and containerized trade growth.

At Euroseas, the fourth quarter of 2019 marked another quarter of fleet expansion as we acquired 4 vessels on top of 4 vessels acquired in the third quarter, resulting in a fleet of 19 units. The carrying capacity of our fleet almost doubled over the last six months. Both of these transactions were examples of us using our public listing as a platform of consolidation of additional fleets partly paying for the acquisitions by issuing stock validating our growth strategy.

Despite the uncertainties in the market place, our fleet remains fully employed except EM Oinousses that suffered an engine room fire and is to undergo certain repairs. We believe that the near term will be shaped by the effects of the coronavirus epidemic. We are very optimistic for the medium term prospects of the market due to the very low orderbook, the expected rebounding of the trade and the further constraints of vessel availability placed by the installation of scrubbers on a portion of the fleet to comply with the low sulfur emission regulations. Euroseas’ strategy remains focused on exploiting its position as the only publicly-listed feeder and small containership-focused company to continue growing pursuing accretive opportunities via mergers or combinations with privately owned vessels or fleets.”

Tasos Aslidis, Chief Financial Officer of Euroseas commented: “The operating results of the fourth quarter of 2019 reflect the slightly increased levels of charter rates in the containership markets as compared to the same period of 2018. On average, during the fourth quarter of 2019, our vessels earned approximately 5.9% higher time charter equivalent rates compared to the fourth quarter of 2018.”

“Total daily vessel operating expenses, including management fees, general and administrative expenses, but excluding drydocking costs, were higher by 7% during the fourth quarter of 2019 compared to the same quarter of last year due to increased expenses for selected vessels as a result of their trading region as well as the timing of certain expenses, while for the full year 2019 they were just about 1% higher as compared to 2018. Adjusted EBITDA during the fourth quarter of 2019 remained unchanged at $1.2 million compared to the fourth quarter of last year, and it reached $5.3 million versus $4.3 million for the respective twelve-month periods of 2019 and 2018.”

“As of December 31, 2019, our outstanding debt (excluding the unamortized loan fees) was $90.2 million, versus restricted and unrestricted cash of approximately $5.9 million.”

Fourth Quarter 2019 Results:
For the fourth quarter of 2019, the Company reported total net revenues of $13.3 million representing a 65.9% increase over total net revenues of $8.0 million during the fourth quarter of 2018. The Company reported a net loss for the period of $0.8 million and a net loss attributable to common shareholders of $0.9 million, as compared to a net loss of $0.5 million and a net loss attributable to common shareholders of $0.8 million respectively, for the fourth quarter of 2018. Drydocking expenses amounted to $1.5 million during the fourth quarter of 2019 comprising the drydocking cost of one vessel completing her drydocking and two vessels that completed their intermediate surveys in-water. For the same period of 2018 drydocking expenses amounted to $0.3 million comprising the drydocking cost of one vessel completing her drydocking that started within the third quarter of 2018, another vessel that completed her in water survey and a third vessel that completed her drydock in 2019. Depreciation expense for the fourth quarter of 2019 increased to $1.5 million from $0.8 million in the fourth quarter of 2018 due to the increased number of vessels in the Company’s fleet.

On average, 16.8 vessels were owned and operated during the fourth quarter of 2019 earning an average time charter equivalent rate of $9,086 per day compared to 11.0 vessels in the same period of 2018 earning on average $8,577 per day.

Adjusted EBITDA1 for the fourth quarter of 2019 remained unchanged at $1.2 million compared to the corresponding period in 2018.

Basic and diluted loss per share attributable to common shareholders for the fourth quarter of 2019 was $0.18 calculated on 5,036,122 basic and diluted weighted average number of shares outstanding, compared to basic and diluted loss per share of $0.53 for the fourth quarter of 2018, calculated on 1,476,918 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 derivatives and the amortization of below market time charters acquired, the adjusted loss attributable to common shareholders for the quarter ended December 31, 2019 would have been $0.32 per share basic and diluted compared to adjusted loss of $0.55 per share basic and diluted for the quarter ended December 31, 2018. Usually, security analysts do not include the above items in their published estimates of earnings per share.

Full Year 2019 Results:
For the full year of 2019, the Company reported total net revenues of $40.0 million representing a 16.3% increase over total net revenues of $34.4 million during the twelve months of 2018. The Company reported a net loss for the year of $1.7 million and a net loss attributable to common shareholders of $3.5 million, as compared to net loss of $0.7 million and a net loss attributable to common shareholders of $2.0 million, respectively, for the twelve months of 2018. The results for the twelve months of 2019 include $0.9 million of amortization of below market charters acquired and $0.04 million of unrealized gain on derivatives. The results for the twelve months of 2018 include a $1.3 million gain on sale of a vessel and $0.2 million of unrealized gain on derivatives. Depreciation expense for the twelve months of 2019 was $4.2 million compared to $3.3 million during the same period of 2018 due to the increased number of vessels in the Company’s fleet.

Interest and other financing costs for the twelve months of 2019 amounted to $3.8 million compared to $3.1 million for the same period of 2018. This increase is due to the increased amount of debt in the current period compared to the same period of 2018. Vessel operating expenses for the same period of 2019 amounted to $24.0 million as compared to $20.0 million for the same period of 2018. The increased amount is due to the higher number of vessels owned and operated in the twelve months of 2019 compared to the same period of 2018. Drydocking expenses amounted to $2.7 million for the twelve months of 2019 (one of our vessels completed her special survey with drydock, another four vessels completed their intermediate surveys in-water and a vessel completed her special survey with drydock that started in 2018), compared to $2.8 million for the same period of 2018 (three of our vessels completed their special surveys with drydocks, another three completed their intermediate surveys in-water and a vessel started her special survey that completed with drydock in 2019).

On average, 13.1 vessels were owned and operated during the twelve months of 2019 earning an average time charter equivalent rate of $8,782 per day compared to 11.49 vessels in the same period of 2018 earning on average $9,179 per day.

Adjusted EBITDA1 for the twelve months of 2019 was $5.3 million compared to $4.3 million during the twelve months of 2018.

Basic and diluted loss per share attributable to common shareholders for the twelve months of 2019 was $1.21, calculated on 2,861,928 basic and diluted weighted average number of shares outstanding compared to basic and diluted loss per share of $1.41 for the twelve months of 2018, calculated on 1,414,775 basic and diluted weighted average number of shares outstanding.

Excluding the effect on the loss attributable to common shareholders for the twelve months of 2019 of the unrealized gain on derivatives and the amortization of the below market time charters acquired, the adjusted loss per share attributable to common shareholders for the year ended December 31, 2019 would have been $1.52 compared to adjusted loss of $2.51 per share basic and diluted for 2018, which was also adjusted by excluding the gain on sale of a vessel. As previously mentioned, usually, security analysts do not include the above items in their published estimates of earnings per share.

Operating developments:
During January 2020, M/V EM Oinousses experienced an engine room fire while sailing off Mozambique carrying empty containers. The fire was extinguished without any injuries to the crew; the vessel is undergoing evaluation for the type of repairs required. It is expected for insurance to cover the majority of the costs.

Fleet Profile:

The Euroseas Ltd. fleet profile is as follows:

Name Type Dwt TEU Year Built Employment(*)  

TCE Rate ($/day)

Container Carriers            
AKINADA BRIDGE Intermediate 71,366 5,610 2001 TC until  Feb-20 $16,500
SYNERGY BUSAN Intermediate 50,726 4,253 2009 TC until  Mar-20 $13,250
SYNERGY ANTWERP Intermediate 50,726 4,253 2008 TC until  May-20 CONTEX(**) 4250 less 6.25%; floor $8,000 / ceiling $16,000
SYNERGY OAKLAND (***) Intermediate 50,787 4,253 2009 TC until  Oct-20 plus 8-12 months extension option $9,000 ’til Feb-20; $10,000 ’til Oct-20; option CONTEX(**) 4250 less 10%
SYNERGY KEELUNG Intermediate 50,969 4,253 2009 TC until Dec-20/Jun-22 plus 8- 12 months option $10,000 ’til Jun-21; $11,750 ’til Jun-22; option $14,500
EM KEA Feeder 42,165 3,100 2007 TC until  Mar-20 $9,700
EM ASTORIA Feeder 35,600 2,788 2004 TC until  Mar-20 $8,500
EVRIDIKI G Feeder 34,677 2,556 2001 TC until  Sep-20 $10,250
EM CORFU Feeder 34,654 2,556 2001 TC until  Sep-21 $10,200
EM ATHENS Feeder 32,350 2,506 2000 TC until Oct-20 $9,250
EM OINOUSSES Feeder 32,350 2,506 2000 Undergoing repairs
DIAMANTIS P Feeder 30,360 2,008 1998 TC until Jul-20 $8,000
EM SPETSES Feeder 23,224   1,740 2007 TC until Mar-20 $7,000
EM HYDRA Feeder 23,351 1,740 2005 TC until Mar-20 $7,500
JOANNA Feeder 22,301 1,732 1999 TC until  Feb-21 $8,050
MANOLIS P Feeder 20,346 1,452 1995 TC until Mar-20 $6,800
AEGEAN  EXPRESS Feeder 18,581 1,439 1997 TC until Mar-20 $7,500
KUO HSIUNG Feeder 18,154 1,169 1993 TC until Mar-20 $7,500
NINOS Feeder 18,253 1,169 1990 TC until Mar-20 $7,750
 
Total Container Carriers
19 660,940 51,083

Note:
(*) Charter duration indicates the earliest redelivery date unless the contract rate is lower than the current market rate in which cases the latest redelivery date is assumed; vessels with the latest redelivery date shown are marked by (***)
(**)The CONTEX (Container Ship Time Charter Assessment Index) has been published by the Hamburg and Bremen Shipbrokers’ Association (VHBS) since October 2007. The CONTEX is a company-independent index of time charter rates for container ships. It is based on assessments of the current day charter rates of six selected container ship types, which are representative of their size categories: Type 1,100 TEU and Type 1,700 TEU with a charter period of one year, and the Types 2,500, 2,700, 3,500 and 4,250 TEU all with a charter period of two years.

Summary Fleet Data:

  Three
Months,
Ended

December 31,
2018
Three
Months,
Ended
December 31,
2019
Twelve
Months,
Ended
December 31,
2018
Twelve
Months,
Ended
December 31,
2019
FLEET DATA
Average number of vessels (1) 11.00 16.84 11.49 13.1
Calendar days for fleet (2) 1,012.0 1,549.0 4,191.0 4,782.0
Scheduled off-hire days incl. laid-up (3) 7.6 59.5 76.5 102.3
Available days for fleet (4) = (2) – (3) 1,004.4 1,489.5 4,114.5 4,679.7
Commercial off-hire days (5) 92.1 137.8 38.4
Operational off-hire days (6) 1.4 3.8 162.7 5.1
Voyage days for fleet (7) = (4) – (5) – (6) 910.9 1,485.7 3,814.0 4,636.2
Fleet utilization (8) = (7) / (4) 90.7% 99.7% 92.7% 99.1%
Fleet utilization, commercial (9) = ((4) – (5)) / (4) 90.8% 100.0% 96.7% 99.2%
Fleet utilization, operational (10) = ((4) – (6)) / (4) 99.9% 99.7% 96.0% 99.9%
AVERAGE DAILY RESULTS
Time charter equivalent rate (11) 8,577 9,086 9,179 8,782
Vessel operating expenses excl. drydocking expenses (12) 5,275 5,839 5,613 5,783
General and administrative expenses (13) 507 343 612 511
Total vessel operating expenses (14) 5,782 6,182 6,225 6.294
Drydocking expenses (15) 332 990 662 568

(1) Average number of vessels is the number of vessels that constituted the Company’s fleet for the relevant period, as measured by the sum of the number of calendar days each vessel was a part of the Company’s fleet during the period divided by the number of calendar days in that period.

(2) Calendar days. We define calendar days as the total number of days in a period during which each vessel in our fleet was in our possession including off-hire days associated with major repairs, drydockings or special or intermediate surveys or days of vessels in lay-up. Calendar days are an indicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses that we record during that period.

(3) The scheduled off-hire days including vessels laid-up are days associated with scheduled repairs, drydockings or special or intermediate surveys or days of vessels in lay-up.

(4) Available days. We define available days as the total number of days in a period during which each vessel in our fleet was in our possession net of scheduled off-hire days including laid up. We use available days to measure the number of days in a period during which vessels were available to generate revenues.

(5) Commercial off-hire days. We define commercial off-hire days as days a vessel is idle without employment.

(6) Operational off-hire days. We define operational off-hire days as days associated with unscheduled repairs or other off-hire time related to the operation of the vessels.

(7) Voyage days. We define voyage days as the total number of days in a period during which each vessel in our fleet was in our possession net of commercial and operational off-hire days. We use voyage days to measure the number of days in a period during which vessels actually generate revenues or are sailing for repositioning purposes.

(8) Fleet utilization. We calculate fleet utilization by dividing the number of our voyage days during a period by the number of our available days during that period. We use fleet utilization to measure a company’s efficiency in finding suitable employment for its vessels and minimizing the amount of days that its vessels are off-hire for reasons such as unscheduled repairs or days waiting to find employment.

(9) Fleet utilization, commercial. We calculate commercial fleet utilization by dividing our available days net of commercial off-hire days during a period by our available days during that period.

(10) Fleet utilization, operational. We calculate operational fleet utilization by dividing our available days net of operational off-hire days during a period by our available days during that period.

(11) Time charter equivalent, or TCE, is a measure of the average daily revenue performance of our vessels. Our method of calculating TCE is determined by dividing time charter revenue and voyage charter revenue net of voyage expenses by voyage days for the relevant time period. Voyage expenses primarily consist of port, canal and fuel costs that are unique to a particular voyage, which would otherwise be paid by the charterer under a time charter contract, or are related to repositioning the vessel for the next charter. TCE is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company’s performance despite changes in the mix of charter types (i.e., spot voyage charters, time charters and bareboat charters) under which the vessels may be employed between the periods. Our definition of TCE may not be comparable to that used by other companies in the shipping industry.

(12) Daily vessel operating expenses, which includes crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs and management fees are calculated by dividing vessel operating expenses by fleet calendar days for the relevant time period. Drydocking expenses are reported separately.

(13) Daily general and administrative expense is calculated by dividing general and administrative expenses by fleet calendar days for the relevant time period.

(14) Total vessel operating expenses, or TVOE, is a measure of our total expenses associated with operating our vessels. TVOE is the sum of vessel operating expenses, management fees and general and administrative expenses; drydocking expenses are not included. Daily TVOE is calculated by dividing TVOE by fleet calendar days for the relevant time period.

(15) Drydocking expenses include expenses during drydockings that would have been capitalized and amortized under the deferral method, divided by the fleet calendar days for the relevant period. Drydocking expenses could vary substantially from period to period depending on how many vessels underwent drydocking during the period. The Company expenses drydocking expenses as incurred.

 

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