Euroseas reports $19.2m net loss for the second quarter

Euroseas_Pittas

Euroseas announced its results for the three and six month period ended June 30, 2016 as well as certain fleet updates.

Second Quarter 2016 Highlights:

Total net revenues of $7.3 million. Net loss of $19.2 million; net loss attributable to common shareholders (after a $0.4 million of dividend on Series B Preferred Shares) of $19.6 million or $2.42 loss per share basic and diluted. The results include an impairment charge of $14.0 million on our “Investment in joint venture.” Adjusted net loss attributable to common shareholders1 for the period was $0.51 per share basic and diluted.

Adjusted EBITDA1 was $(0.9) million.

An average of 11.4 vessels were owned and operated during the second quarter of 2016 earning an average time charter equivalent rate of $7,373 per day.

The Company declared its tenth dividend of $0.4 million on its Series B Preferred Shares; the dividend was paid in-kind by issuing additional Series B Preferred Shares.

First Half 2016 Highlights:

Total net revenues of $13.9 million. Net loss of $22.0 million; net loss attributable to common shareholders (after a $0.8 million of dividend on Series B Preferred Shares) of $22.9 million or $2.82 loss per share basic and diluted. The results for the first half also include an impairment charge of $14.0 million of “Investment in joint venture”. Adjusted net loss per share attributable to common shareholders1 for the period was $0.89.

Adjusted EBITDA1 was $(1.0) million.

An average of 11.5 vessels were owned and operated during the first half of 2016 earning an average time charter equivalent rate of $6,967 per day.

Other developments:

Recently, the Company announced that it canceled one of its newbuilding contracts with the Dayang shipyard due to excessive delays in the construction of the vessel (Hull DY 160) as specified in the contract. The Company has demanded the return of its progress payments and other expenses including interest of approximately $8.6 million as specified in the newbuilding contract and secured by refund guaranties. The parties have referred the matter to arbitration.

Also the Company announced that it amended its newbuilding contract with the YSJ yard for the construction of a Kamsarmax vessel to provide the Company with the option until December 31, 2016 to change the type of the vessel to be built, buy another vessel built by the yard transferring any payments made under the newbuilding contract, or cancel the newbuilding contract without additional cost.

Furthermore, the Company announces that it has agreed to purchase M/V Aegean Express, a 1997-built 1,439 teu fully cellular containership for approximately $3 million, to replace M/V Cpt. Costas, a 1992-built containership which was sold during the second quarter of 2016.

Finally, the Company announces that the Company’s Board authorized the establishment of an ATM offering of up to 15% of the Company’s outstanding shares.

Aristides Pittas, Chairman and CEO of Euroseas commented: “While the charter markets for both sectors we operate remain challenging, we have managed to improve the liquidity of the Company by restructuring or refinancing some of our loans. Our revised loan profile combined with certain developments in our newbuilding contracts have reduced the required capital expenditures and significantly improved the liquidity outlook of Euroseas. We are now focused on how to take advantage of the low vessel price environment and find opportunities to expand and renew our fleet, as we have done with the replacement of M/V Cpt. Costas with a five year younger vessel for a marginally higher price.

We remain guardedly optimistic about the prospects of the markets mainly because of the significant adjustments underway in the supply of vessels both in terms of vessel scrapping but also in the form of newbuilding contract delays and cancellations, and furthermore, non-existent new order levels. Thus, on the chartering front, as we expect a modest improvement of both segments over the next twelve months, we are pursuing a chartering strategy focused on ensuring that our vessels remain employed and committed to shorter term charters.

Lately, we have seen an increased interest in our stock evidenced by a very significant increase in the trading liquidity. This is, of course, very positive and we hope it continues. The ATM that our Board approved is intended to facilitate new investors to participate in the Company and help keep the trading liquidity high, something essential for the longer term good of our shareholders. As we are not facing any cash needs, we may or may not execute fully on the ATM depending on whether we deem this would help our trading liquidity or assist in further vessel acquisitions or renewals.”

Tasos Aslidis, Chief Financial Officer of Euroseas commented: “The results of the second quarter of 2016 reflect the low levels of the containership and drybulk markets compared to the same quarter of 2015.

Total daily vessel operating expenses, including management fees, general and administrative expenses but excluding drydocking costs, averaged $6,065 per vessel per day during the second quarter of 2016 as compared to $6,145 per vessel per day for the same quarter of last year, and $6,096 per vessel per day for the first half of 2016 as compared to $6,342 per vessel per day for the same period of 2015, reflecting a 1.3% and 3.9% decline, respectively. As always, we want to emphasize that cost control remains a key component of our strategy. The results also include a loss on termination of a newbuilding contract we canceled related to expenses that cannot be refunded as a result of the cancelation (like management and supervision costs). Also, our results include an impairment charge of $14.0 million on our equity minority investment in Euromar LLC, our joint venture with two private equity firms, as a result of continuing depressed containership markets and new debt restructuring agreements between Euromar LLC and its banks.

As of June 30, 2016, our outstanding debt was $53.7 million (excluding the unamortized loan fees of $0.4 million) versus restricted and unrestricted cash of about $12.9 million. As of the same date, our scheduled debt repayments over the next 12 months amounted to about $11.1 million (excluding the unamortized loan fees). All our debt covenants are satisfied subject to completion of documentation of a restructuring agreement with one of our banks.”

Second Quarter 2016 Results:
For the second quarter of 2016, the Company reported total net revenues of $7.3 million representing a 22.3% decrease over total net revenues of $9.4 million during the second quarter of 2015. The Company reported net loss for the period of $19.2 million and a net loss attributable to common shareholders of $19.6 million, compared to $3.3 million and $3.7 million respectively for the second quarter of 2015. The results for the second quarter of 2016 include a $0.1 million unrealized loss on derivatives, a $0.01 million realized loss on derivatives, a $0.01 million gain on sale of a vessel, a $1.4 million loss on termination of new building vessel contract and a $14.0 million impairment charge on investment in joint venture, as compared to $0.1 million unrealized gain on derivatives, a $0.1 million realized loss on derivatives for the same period of 2015. Drydocking expenses amounted to $1.2 million during the second quarter of the year 2016 as one vessels underwent drydock compared to three vessels that underwent in-water surveys (in lieu of drydock) during the second quarter of 2015 for a total amount of $0.4 million. Depreciation expenses for the second quarter of 2016 were $2.2 million compared to $2.9 million during the same period of 2015. On average, 11.4 vessels were owned and operated during the second quarter of 2016 earning an average time charter equivalent rate of $7,373 per day compared to 15.0 vessels in the same period of 2015 earning on average $7,127 per day.

Adjusted EBITDA for the second quarter of 2016 was $(0.9) million compared to $(0.1) million achieved during the second quarter of 2015. Please see below for Adjusted EBITDA reconciliation to net loss and cash flow provided by operating activities.

Basic and diluted loss per share attributable to common shareholders for the second quarter of 2016 was $2.42 calculated on 8,104,860 basic and diluted weighted average number of shares outstanding, compared to basic and diluted loss per share of $0.64 for the second quarter of /2015, calculated on 5,784,025 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 loss on derivatives and the realized loss on derivatives the loss on the termination of the newbuilding contract and the impairment charge on the investment in joint venture, the adjusted net loss per share attributable to common shareholders for the quarter ended June 30, 2016 would have been $0.51 per share basic and diluted compared to net loss of $0.65 per share basic and diluted for the quarter ended June 30, 2015. Usually, security analysts do not include the above items in their published estimates of earnings per share.

First Half 2016 Results:
For the first half of 2016, the Company reported total net revenues of $13.9 million representing a 21.0% decrease over total net revenues of $17.6 million during the first half of 2015, as a result of the decreased average number of vessels. The Company reported a net loss for the period of $22.0 million and a net loss attributable to common shareholders of $22.9 million, as compared to net loss of $8.7 million and $9.5 million respectively, for the first half of 2015. The results for the first half of 2016 include a $0.2 unrealized loss on derivatives, a $0.1 million realized loss on derivatives, a $0.01 million gain on sale of a vessel, a $1.4 million loss on termination of a new building vessel contract and a $14.0 million impairment charge on investment in joint venture, as compared to $0.04 million unrealized loss on derivatives, a $0.1 million realized loss on derivatives for the same period of 2015. Depreciation expenses for the first half of 2016 were $4.4 million compared to $5.8 million during the same period of 2015. On average, 11.5 vessels were owned and operated during the first half of 2016 earning an average time charter equivalent rate of $6,967 per day compared to 15.0 vessels in the same period of 2015 earning on average $6,823 per day.

Adjusted EBITDA for the first half of 2016 was $(1.0) million compared to $(1.9) million achieved during the first half of 2015. Please see below for Adjusted EBITDA reconciliation to net loss and cash flow provided by operating activities.

Basic and diluted loss per share attributable to common shareholders for the first half of 2016 was $2.82, calculated on 8,104,860 basic and diluted weighted average number of shares outstanding compared to basic and diluted loss per share of $1.64 for the first half of 2015, calculated on 5,784,025 basic and diluted weighted average number of shares outstanding.

Excluding the effect on the loss attributable to common shareholders for the first half of 2016 of the unrealized loss on derivatives, realized loss on derivatives, the loss on the termination of the newbuilding contract and the impairment charge on the investment in joint venture, the adjusted net loss per share attributable to common shareholders for the six-month period ended June 30, 2016 would have been $0.89 compared to loss of $1.62 per share basic and diluted for the same period in 2015. Usually, security analysts do not include the above items in their published estimates of earnings per share.

1 Adjusted EBITDA, Adjusted net loss and Adjusted loss per share are not recognized measurements under 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 U.S. GAAP.

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