Euroseas announced its results for the three month period ended March 31, 2018.
First Quarter 2018 Financial Highlights:
Total net revenues of $12.9 million. Net loss of $3.2 million; net loss attributable to common shareholders (after a $0.5 million of dividend on Series B Preferred Shares) of $3.7 million or $0.33 loss per share basic and diluted. Adjusted net loss attributable to common shareholders1 for the period was $3.8 million or $0.34 loss per share basic and diluted.
Adjusted EBITDA1 was $(0.2) million.
An average of 17.0 vessels were owned and operated during the first quarter of 2018 earning an average time charter equivalent rate of $9,167 per day.
The Company declared its seventeenth dividend of $0.5 million on its Series B Preferred shares; the dividend was paid in-kind by issuing additional Series B Preferred Shares.
On May 7, 2018, the Company took delivery of newbuilding M/V Ekaterini, a 82,000 dwt drybulk vessel. As previously announced, the vessel entered into a two-year charter immediately after its delivery at a rate of $13,000 per day. The Company also reported that its containership, M/V EM Astoria, suffered propeller damage and will require repairs that will prevent the vessel from trading. The Company is making every possible effort for the vessel to resume trading in the shortest possible time.
Drybulk Fleet Spin-off
The Company announced that it filed a registration statement on Form F-1 with the Securities and Exchange Commission to spin-off the Company’s drybulk fleet into a separate company, EuroDry Ltd., which has applied for listing on the NASDAQ Capital Market.
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.
Aristides Pittas, Chairman and CEO of Euroseas commented: “Although our revenues continued to increase in Q1 following the continued improvement in both drybulk and container markets we registered a loss during the first quarter of 2018, mainly due to the disproportionate number of drydocks we had to pass during the quarter. We expect both sectors to continue to register positive results in the future if the markets maintain their current levels and the company to revert to profitability for the remainder of the year.
“However, from our perspective, the most significant development during the quarter was our decision to spin-off our drybulk fleet into a separate publicly listed company, EuroDry Ltd. We believe that separate drybulk and containership investment options will give our shareholders the flexibility to adjust their holdings, if they so wish, between the two sectors. We also anticipate that the creation of sector-focused companies will allow the capital markets to appreciate the value that our public platforms can create as consolidators in their respective fields: EuroDry Ltd., a middle range drybulk owner that owns six vessels, three of which are newbuildings, one ultramax and two kamsarmaxes, built according to our specifications in the last two years and three high-quality Panamax vessels Japanese-built post-2000; and Euroseas Ltd., the only feeder containership public company, with a fleet of eleven vessels that are proven workhorses of the sector. We also expect that both EuroDry and Euroseas will trade much closer to their net asset value, like their peers, than the combined company does now.
“We plan to take advantage of growth opportunities in each of the two sectors to increase the size of each respective company as we believe that they are both well positioned to do so both in terms of their capital structure and their contract mix. Each of them being a public company with a cost-effective operating structure could be attractive to other small or large private fleets looking for opportunities to engage in transactions with acquirors. We plan to discuss in more detail the spin-off and the opportunities it may generate in a separate conference call on Monday, May 14, 2018 at 10 am EDT.”
Tasos Aslidis, Chief Financial Officer of Euroseas commented: “The results of the first quarter of 2018 reflect the improved rates most of our vessels earned as a result of the recovering state of the drybulk and container markets. Comparing our results for the first quarter of 2018 with the same period of 2017, our net revenues increased by about $4.6 million and we also incurred $0.7 million lower voyage expenses. Operating expenses, including management fees and general and administrative expenses increased by approximately $3.5 million as compared to the first quarter of 2017. This was mainly due to the operation of 17.0 vessels during the first quarter of 2018 versus 13.38 vessels during the same period of last year; on a per-vessel-per-day basis, operating expenses, including management fees and general and administrative expenses increased by 19% during the first quarter of 2018 as compared to the same period in 2017 which was primarily attributable to certain expenses budgeted for 2018 occurring in the first quarter, the different mix of vessels we had in 2018 and costs related to the spin-off of our drybulk fleet under way. We believe that we continue to maintain one of the lowest operating cost structures amongst the public shipping companies which is one of our competitive advantages. Also, during the first quarter of 2018, three of our vessels completed their special surveys with a total cost of $2.2 million not including time lost due to drydockings.
“Adjusted EBITDA during the first quarter of 2018 was $(0.2) compared to $0.2 million achieved for the first quarter of last year. Finally, as of March 31, 2018, our outstanding debt (excluding the unamortized loan fees) is about $71.2 million versus restricted and unrestricted cash of about $10.4 million.”
First Quarter 2018 Results:
For the first quarter of 2018, the Company reported total net revenues of $12.9 million representing a 55.9% increase over total net revenues of $8.3 million during the first quarter of 2017. The Company reported a net loss for the period of $3.2 million and a net loss attributable to common shareholders of $3.7 million, as compared to a net loss of $2.2 million and a net loss attributable to common shareholders of $2.6 million respectively for the first quarter of 2017. Depreciation expense for the first quarter of 2018 amounts to $2.1 million remaining unchanged compared to the same period of 2017. Although the average number of vessels increased, 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, 17.0 vessels were owned and operated during the first quarter of 2018 earning an average time charter equivalent rate of $9,167 per day compared to 13.38 vessels in the same period of 2017 earning on average $7,268 per day. In the first quarter of 2018 three vessels completed their special surveys with a total cost of $2.2 million. In the same period of 2017 one vessel completed an in-water survey with a cost of $0.1 million. The results for the first quarter of 2017 also include a $0.5 million of gain on sale of M/V RT Dagr compared to the same period of 2018.
Adjusted EBITDA for the first quarter of 2018 was $(0.2) million, compared to $0.2 million achieved for the first quarter of 2017. Please see below for Adjusted EBITDA reconciliation to net loss and cash flow provided by operating activities.
Basic and diluted loss per share for the first quarter of 2018 was $0.33, calculated on 11,133,764 weighted average number of shares outstanding compared to basic and diluted loss per share of $0.24 for the first quarter of 2017, calculated on 10,999,554 weighted average number of shares outstanding.
Excluding the effect on the loss for the quarter of unrealized gain on derivatives and the realized loss on derivatives, the adjusted loss per share for the quarter ended March 31, 2018 would have been $0.34 per share basic and diluted, compared to the loss of $0.29 per share basic and diluted for the quarter ended March 31, 2017. Usually, security analysts do not include the above items in their published estimates of earnings per share.