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Euroseas posts best-ever net income in 4Q2021

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, 2021.

Fourth Quarter 2021 Financial Highlights:

  • Total net revenues of $38.3 million. Net income and net income attributable to common shareholders of $22.7 million or $3.14 and $3.13 earnings per share basic and diluted, respectively. Adjusted net income attributable to common shareholders1 for the period was $22.9 million or $3.18 and $3.17 per share basic and diluted, respectively.
  • Adjusted EBITDA1 was $26.1 million.
  • An average of 15.01 vessels were owned and operated during the fourth quarter of 2021 earning an average time charter equivalent rate of $29,994 per day.

Full Year 2021 Highlights:

  • Total net revenues of $93.9 million. Net income of $42.9 million; net income attributable to common shareholders (after a $0.3 million dividend on Series B Preferred Shares and a $0.3 million of preferred deemed dividend arising out of the redemption of approximately $8.4 million of Series B Preferred Shares in the first half of 2021) of $42.3 million or $6.06 and $6.05 earnings per share basic and diluted, respectively. Adjusted net income attributable to common shareholders1 for the period was $42.0 million or $6.02 and $6.01 per share basic and diluted, respectively.
  • Adjusted EBITDA1 was $52.7 million.
  • An average of 14.25 vessels were owned and operated during the year 2021, earning an average time charter equivalent rate of $19,309 per day.

Recent developments

  • On January 28, 2022, we signed a contract for the construction of two additional Eco design fuel efficient containerships. The vessels will have a carrying capacity of about 2,800 teu each and will be built at Hyundai Mipo Dockyard Co. in South Korea. The two newbuildings are scheduled to be delivered during the fourth quarter of 2023 and first quarter of 2024, respectively. The total consideration for each of these two newbuilding contracts is approximately $43.15 million and will be financed with a combination of debt and equity. The vessels are sisterships of a pair of vessels ordered by Euroseas Ltd. in June 2021.

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1Adjusted EBITDA, Adjusted net income and Adjusted earnings 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:

“The fourth quarter of 2021 was a seminal one for Euroseas as we recorded the highest net income level in our history of about $22.7 million. At the same time, we have chartered about 92% of our available capacity in 2022, about 62% of our available capacity in 2023, and even about 40% of our available days in 2024. The high level of our contracted revenues secures extremely high profitability levels for Euroseas over the next two to three years.”

“In light of the increased environmental regulation that would reduce -on average- the transportation capacity of the existing fleet, we have shifted our strategic focus on how to position Euroseas post-pandemic and beyond. In this context, in January 2022, we placed an order for two more 2,800 teu vessels that we expect to have delivered in the fourth quarter of 2023 and first quarter of 2024. This brings our newbuilding program to four vessels and solidifies our market presence in the large eco feeder sector.”

“The retreat of the containerships rates during November and December 2021 proved to be short-lived. With the turn of the year, containership rates started increasing again and have returned to -and for some segments exceeded- the record high levels set only four months ago in October 2021. We are quite optimistic about the strength of the market over the next couple of years despite the expected easing of the inefficiencies in ports, due to the limited deliveries in the near term and the constraints on effective fleet supply of the emissions regulations from 2023 onwards alongside trade growth which has rebounded from the pandemic lows. We continuously monitor market developments and evaluate investment opportunities focusing on creating consistent returns for our shareholders and exploiting our public listing and increasing liquidity position.”

Tasos Aslidis, Chief Financial Officer of Euroseas commented:

“The operating results of the fourth quarter of 2021 reflect the increased levels of charter rates in the containership markets as compared to the same period of 2020, with net income amounting to $22.7 million for the fourth quarter in 2021 compared to a net income of $0.6 million for the fourth quarter of 2020. On average, during the fourth quarter of 2021, our vessels earned approximately 185.7% higher time charter equivalent rates compared to the fourth quarter of 2020.”

“Total daily vessel operating expenses, including management fees, general and administrative expenses, but excluding drydocking costs, were higher by 7.6% during the fourth quarter of 2021 compared to the same quarter of last year. The increased operating expenses for the fourth quarter of 2021 are mainly due to higher hull and machinery insurance premiums and the increased crewing costs for our vessels resulting from difficulties in crew rotation due to COVID-19 related restrictions. Adjusted EBITDA during the fourth quarter of 2021 was $26.1 million compared to the $2.1 million achieved in fourth quarter of last year, and it reached $52.7 million versus $11.8 million for the respective twelve-month periods of 2021 and 2020.”

“As of December 31, 2021, our outstanding bank debt (excluding the unamortized loan fees) was $119.0 million, versus restricted and unrestricted cash of approximately $31.5 million. As of the same date, our scheduled debt repayments over the next 12 months amounted to about $29.3 million (excluding the unamortized loan fees).”

Fourth Quarter 2021 Results:
For the fourth quarter of 2021, the Company reported total net revenues of $38.3 million representing a 217.9% increase over total net revenues of $12.0 million during the fourth quarter of 2020, which was the result of the increased average time charter rates our vessels earned in the fourth quarter of 2021 compared to the corresponding period of 2020. The Company reported net income and net income attributable to common shareholders for the period of $22.7 million, as compared to a net income of $0.6 million and a net income attributable to common shareholders of $0.4 million for the fourth quarter of 2020.

Vessel operating expenses for the same period of 2021 amounted to $8.3 million as compared to $7.5 million for the same period of 2020. The increased amount is mainly due to the higher number of vessels owned and operated in the three months of 2021 compared to the same period of 2020, as well as the increased crewing costs for our vessels compared to the same period of 2020, resulting from difficulties in crew rotation due to COVID-19 related restrictions and the increase in hull and machinery insurance premiums. Drydocking expenses amounted to $1.2 million during the fourth quarter of 2021 comprising the cost of one vessel completing her special survey with drydock. For the same period of 2020 drydocking expenses amounted to $0.1 million comprising the cost of one vessel completing her intermediate survey in-water. Depreciation expense for the fourth quarter of 2021 increased to $2.4 million from $1.6 million in the fourth quarter of 2020, as a result of the increased number of vessels operated and the fact that the new vessels acquired in the fourth quarter of 2021 have a higher average daily depreciation charge as a result of their higher acquisition price compared to the remaining vessels. General and administrative expenses increased to $1.2 million in the fourth quarter of 2021, as compared to $0.8 million in the fourth quarter of 2020, mainly due to higher executive compensation expenses.

On average, 15.01 vessels were owned and operated during the fourth quarter of 2021 earning an average time charter equivalent rate of $29,994 per day compared to 14.43 vessels in the same period of 2020 earning on average $10,497 per day.

Interest and other financing costs for the fourth quarter of 2021 amounted to $0.78 million compared to $0.81 million for the same period of 2020. This decrease is due to the decrease in the weighted average LIBOR rate, partly offset by the increase in the Company’s average outstanding indebtedness in the current period compared to the same period of 2020.

Adjusted EBITDA1 for the fourth quarter of 2021 was $26.1 million compared to $2.1 million for the corresponding period in 2020.

Basic and diluted earnings per share attributable to common shareholders for the fourth quarter of 2021 was $3.14 and $3.13 calculated on 7,210,466 and 7,244,042 basic and diluted weighted average number of shares outstanding, respectively, compared to basic and diluted earnings per share of $0.07 for the fourth quarter of 2020, calculated on 6,149,300 basic and diluted weighted average number of shares outstanding.

Excluding the effect on the income attributable to common shareholders for the quarter of the unrealized loss on derivatives, the amortization of below market time charters acquired and the depreciation charged due to the increased value of the vessel acquired with below market time charter, the adjusted earnings attributable to common shareholders for the quarter ended December 31, 2021 would have been $3.18 and $3.17 per share basic and diluted, respectively, compared to an adjusted loss of $0.16 per share basic and diluted for the quarter ended December 31, 2020, after excluding unrealized gain on derivatives, net gain on sale of vessels, the amortization of below market time charters acquired and the depreciation charged due to the increased value of the vessels acquired with below market time charters. Usually, security analysts do not include the above items in their published estimates of earnings per share.

Full Year 2021 Results:
For the full year of 2021, the Company reported total net revenues of $93.9 million, representing a 76.2% increase, over total net revenues of $53.3 million during the twelve months of 2020. The Company reported a net income for the year of $42.9 million and a net income attributable to common shareholders of $42.3 million, as compared to a net income of $4.0 million and a net income attributable to common shareholders of $3.3 million for the twelve months of 2020. The results for the twelve months of 2021 include a $0.2 million of amortization of below market time charters acquired and a $0.2 million unrealized gain on derivatives. The results for the twelve months of 2020 included a $1.7 million of amortization of below market time charters acquired, a $0.6 million unrealized loss on derivatives, a $2.5 million net gain on sale of vessels and a $0.1 million loss on write-down of vessel held for sale.

Vessel operating expenses for the twelve months of 2021 amounted to $29.7 million as compared to $32.2 million for the same period of 2020. This decrease in vessel operating expenses is due to the lower average number of vessels operated by the Company in the twelve months of 2021 as compared to the same period of 2020, partly offset by the increased crewing costs for our vessels compared to the same period of 2020, resulting from difficulties in crew rotation due to COVID-19 related restrictions and the increase in hull and machinery insurance premiums. Depreciation expense for the twelve months of 2021 was $7.2 million compared to $6.6 million during the same period of 2020. Although the average number of vessels operating decreased in 2021 as compared to the same period of 2020, the new vessels acquired in the fourth quarter of 2021 have a higher average daily depreciation charge as a result of their higher acquisition price compared to the vessels sold during 2020, some of which were also fully depreciated.

Related party management fees for the twelve months of 2021 were $4.3 million compared to $5.3 million for the same period of 2020. This decrease in related party management fees is due to the lower average number of vessels operated by the Company in the twelve months of 2021 as compared to the same period of 2020, as well as due to termination fees paid in 2020 for the vessels sold during last year, in accordance with the management agreement. General and administrative expenses increased to $3.5 million during the twelve months of 2021 as compared to $3.0 million in the last year, mainly due to higher executive compensation expenses.

Drydocking expenses amounted to $4.1 million for the twelve months of 2021 (three vessels passed their special survey with drydock), compared to $0.5 million for the same period of 2020 (one vessel passed her intermediate survey in-water and three vessels passed their special survey in-water).

On average, 14.25 vessels were owned and operated during the twelve months of 2021 earning an average time charter equivalent rate of $19,309 per day compared to 17.23 vessels in the same period of 2020 earning on average $9,445 per day.

Interest and other financing costs for the twelve months of 2021 amounted to $2.8 million compared to $4.1million for the same period of 2020. This decrease is due to the decrease in the weighted average LIBOR rate, partly offset by the increase in the Company’s average outstanding indebtedness in the current period compared to the same period of 2020.

Adjusted EBITDA1 for the twelve months of 2021 was $52.7 million compared to $11.8 million during the twelve months of 2020.

Basic and diluted earnings per share attributable to common shareholders for the twelve months of 2021 was $6.06 and $6.05, calculated on 6,976,905 and 6,993,405 basic and diluted weighted average number of shares outstanding, respectively, compared to basic and diluted earnings per share of $0.58 for the twelve months of 2020, calculated on 5,753,917 basic and diluted weighted average number of shares outstanding.

Excluding the effect on the income attributable to common shareholders for the twelve months of 2021 of the unrealized gain on derivatives, the amortization of the below market time charters acquired, the depreciation charged due to the increased value of the vessel acquired with below market time charter and the net loss on sale of vessel, the adjusted earnings attributable to common shareholders for the year ended December 31, 2021 would have been $6.02 and $6.01 basic and diluted, respectively, compared to adjusted loss of $0.02 per share basic and diluted for 2020, after excluding unrealized loss on derivatives, net gain on sale of vessels, loss on write down of vessel held for sale, amortization of the below market time charters acquired and the depreciation charged due to the increased value of the vessels acquired with below market time charters. As previously mentioned, usually, security analysts do not include the above items in their published estimates of earnings per share.

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