Euroseas Ltd. Reports Results for the Year and Quarter Ended December 31, 2013 and Announces Acquisition of Panamax Drybulk Vessel

MAROUSSI, ATHENS, GREECE--(Marketwired - Feb 20, 2014) - Euroseas Ltd. ( NASDAQ : ESEA ), an owner and operator of drybulk and container carrier vessels and provider of seaborne transportation for drybulk and containerized cargoes, announced today its results for the three month period and full year ended December 31, 2013.

Fourth Quarter 2013 Highlights:

  • Net loss of $86.1 million or $1.89 loss per share basic and diluted on total net revenues of $9.7 million. The results include a $78.2 million impairment loss, or $1.71 loss per share basic and diluted. Adjusted net loss 1 for the period would have been $7.8 million or $0.17 loss per share basic and diluted.

  • Adjusted EBITDA 1 was ($0.1) million.

  • An average of 14.00 vessels were owned and operated during the fourth quarter of 2013 earning an average time charter equivalent rate of $7,923 per day.

  • Effective October 1, 2013, the Company changed its estimate of the useful life of its containerships to 25 years from 30 years. The effect of this change of estimates added $3.4 million to the Company's depreciation expenses during the fourth quarter of 2013, or, $0.08 loss per share, basic and diluted. In addition, as of December 31, 2013, the Company determined that the book values of nine of its containerships were not recoverable and, thus, a non-cash impairment loss of $78.2 million, or $1.71 loss per share basic and diluted, was recorded. The Company believes that the book values of its ships, following the impairment charge, provide a better estimation of the current values of its vessels. Taken together, the above two factors increased the Company's loss for the fourth quarter by $1.79 per share, basic and diluted. The Company's loss per share, with a depreciation similar to the one taken in the third quarter and excluding the impairment loss, would have been $0.10 per share, basic and diluted.

Full year 2013 Highlights:

  • Net loss of $103.4 million, or, $2.28 net loss per share basic and diluted on total net revenues of $39.2 million. The full year results include a $78.2 million impairment loss, or, $1.72 loss per share basic and diluted. Adjusted net loss 1 for the period would have been $23.1 million or $0.51 net loss per share basic and diluted.

  • Adjusted EBITDA 1 was $(1.7) million.

  • An average of 14.56 vessels were owned and operated during the twelve months of 2013 earning an average time charter equivalent rate of $7,945 per day.

Recent Developments:

  • In February 2014, the Company signed a memorandum of agreement to acquire a 76,000 dwt panamax drybulk vessel built in 2004, in Japan.

  • In January 2014, the Company raised approximately $29 million of net proceeds by selling 30,700 shares of its Series B Convertible Preferred stock

  • In November 2013, the Company ordered two ultramax drybulk vessel newbuildings with deliveries in late 2015 and early 2016 at a Chinese shipyard.

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: "Containership rates improved marginally during the fourth quarter of 2013 but overall were very depressed in 2013 due to weak demand and significant supply. Drybulk rates exhibited increased volatility since late summer of 2013 reaching for short periods very satisfying rate levels. While our containerships roughly earned their operating costs and mortgage interest, a couple of drybulk vessel charters that we renewed were at higher levels. Looking forward, we remain cautiously optimistic for both sectors expecting rates to increase a bit in 2014 due to marginally improving demand/supply balance.

As a result of our near term outlook of both markets, we believe that 2014 would be a good time to invest in drybulk vessels, mainly, but also containerships, expanding and renewing our fleet. To that effect, we placed an order in November 2013 for two ultramax newbuildings with delivery at the end of 2015 and beginning of 2016, and earlier this week we agreed to acquire a panamax bulker built in 2004, in Japan. We continuously evaluate acquisition opportunities with the objective to invest in additional drybulk vessels, secondhand and/or additional newbuildings, or containerships. At the same time, within 2014 we raised approximately $29 million of net proceeds by issuing convertible preferred stock and welcoming as shareholder one institution with commitment to shipping who is supportive of our strategy.

Our Board believes that 2014 will be a turning point for Euroseas both in terms of its fleet growth and renewal and its determined efforts in the capital markets to raise funds to further capitalize on the market opportunities."

Tasos Aslidis, Chief Financial Officer of Euroseas commented: "The operating results of the fourth quarter of 2013 reflect the continuing depressed state of the containership market which influenced the charter rates earned by our containership vessels. Additionally, increased operating expenses as compared to the fourth quarter of 2012 influenced our results.

Total daily vessel operating expenses, including management fees, general and administrative expenses, but excluding drydocking costs, increased approximately 10.3% during the fourth quarter of 2013 compared to the same quarter of last year while for the full year 2013 the increase was approximately 4.8% over 2012. The composition of our fleet during the compared periods is partly a contributing factor to the percent increase in the operating expenses as during 2013 we sold two vessels with streamlined operating expenses as result of our long period of ownership of them and we bought one which -- as any addition to our fleet -- initially requires higher expenses. As always, we want to emphasize that cost control remains a key component of our strategy, especially at depressed markets like at present.

As of December 31, 2013, our outstanding debt was $45.6 million versus restricted and unrestricted cash of approximately $19.3 million. Our scheduled debt repayments over the next 12 months amounted to about $12.9 million which includes approximately $4.6 million of a balloon repayment which we are considering refinancing. Since the end of the year, we have drawn an additional loan of $8 million against four early 1990's built unencumbered vessels maturing in three years. We were in compliance with all our debt covenants as of December 31, 2013."

Fourth Quarter 2013 Results:
For the fourth quarter of 2013, the Company reported total net revenues of $9.7 million representing a 22% decrease over total net revenues of $12.4 million during the fourth quarter of 2012. The Company reported a net loss for the period of $86.1 million as compared to net loss of $2.0 million for the fourth quarter of 2012. The results for the fourth quarter of 2013 include a $0.1 million net unrealized gain on derivatives, a $78.2 million impairment loss on vessels (or $1.71 loss per share, basic and diluted) and a $0.2 million net realized loss on derivatives as compared to $0.4 million net unrealized gain on derivatives and a $0.4 million net realized loss on derivatives for the same period of 2012.

Effective October 1, 2013, the Company changed its estimate for the useful life of its containerships to 25 years from 30 years based on certain industry developments. The effect of this change of estimate on the depreciation of the Company's vessels added an expense of $3.4 million or $0.08 loss per share, basic and diluted. Depreciation for the fourth quarter of 2013 (including the effect of the change of estimate on the depreciation) was $7.4 million as compared to a $4.0 million, if the estimated useful life of the Company's vessels remained unchanged and as compared to the $4.3 million of the same period of 2012. On average, 14.00 vessels were owned and operated during the fourth quarter of 2013 earning an average time charter equivalent rate of $7,923 per day compared to 15.00 vessels in the same period of 2012 earning an average time charter equivalent rate of $9,510 per day.

Furthermore, as a result of the reduced useful life of its containerships, the Company determined that the book values of nine of its container-carriers were not recoverable as of December 31, 2013 and, thus, a non-cash impairment loss of $78.2 million (or $1.71 loss per share, basic and diluted) was recorded. The Company believes that the book values of its ships, following the impairment, provide a better estimation of the current values of its assets consistent with market conditions.

Adjusted EBITDA for the fourth quarter of 2013 was ($0.1) million decreasing from the $2.5 million achieved during the fourth quarter of 2012. Basic and diluted loss per share for the fourth quarter of 2013 was $1.89, calculated on 45,617,130 basic and diluted weighted average number of shares outstanding, compared to $0.04 losses per share for the fourth quarter of 2012, calculated on 45,265,155 basic and diluted weighted average number of shares outstanding, respectively.

Excluding the effect on the loss for the quarter ended December 31, 2013 of the unrealized gain, the realized loss on derivatives and the impairment loss on vessels, the adjusted loss per share for the quarter would have been $0.17 per share, basic and diluted (and excluding the increase in depreciation $0.10 per share, basic and diluted) compared to a loss of $0.04 per share for the quarter ended December 31, 2012. Usually, security analysts do not include the above items in their published estimates of earnings per share.

Full Year 2013 Results:
For the full year of 2013, the Company reported total net revenues of $39.2 million representing a 25.4% decrease over total net revenues of $52.5 million during the twelve months of 2012. The Company reported net loss for the period of $103.4 million as compared to net loss of $13.2 million for the twelve months of 2012. The results for the twelve months of 2013 include a $1.4 million net unrealized gain on derivatives, a $1.6 million net realized loss on derivatives, a $78.2 million impairment loss (or $1.72 loss per share, basic and diluted) and a $1.9 million net loss on sale of vessels, as compared to a $1.1 million net unrealized gain on derivatives and trading securities, a $1.7 million net realized loss on derivatives and $8.6 million loss on sale of a vessel for the same period of 2012.

Depreciation expense for 2013 was $20.0 million compared to $17.4 million during the same period of 2012. On average, 14.56 vessels were owned and operated during the twelve months of 2013 earning an average time charter equivalent rate of $7,945 per day compared to 15.21 vessels in the same period of 2012 earning an average time charter equivalent rate of $10,155 per day.

Adjusted EBITDA for 2013 was $(1.7) million decreasing from the $14.9 million achieved during the twelve months of 2012. Basic and diluted net loss per share for the twelve months of 2013 was $2.28, calculated on 45,442,841 basic and diluted weighted average number of shares outstanding, compared to a loss per share of $0.34, calculated on 38,950,100 basic and diluted weighted average number of shares outstanding, respectively.

Excluding the effect on the losses for 2013 of the net unrealized gain on derivatives, realized loss on derivatives, the net loss on sale of vessels and impairment loss, the adjusted loss per share for the year ended December 31, 2013 would have been $0.51 per share basic and diluted compared to losses of $0.10 per share for the year ended December 31, 2012. Usually, security analysts do not include the above items in their published estimates of earnings per share.

Fleet Profile:
The Euroseas Ltd. fleet profile, as of February the 20th is as follows:

                         
                         
Name   Type   Dwt   TEU   Year Built   Employment(*)   TCE
Rate ($/day)
Dry Bulk Vessels                        
PANTELIS   Panamax   74,020       2000   TC 'til Apr-14   $12,500
ELENI P   Panamax   72,119       1997   TC 'til Oct-14   Hire 97% of Average BPI 4TC
ARISTIDES N.P.   Panamax   69,268       1993   TC 'til May-14   $7,500
MONICA P   Handymax   46,667       1998   TC 'til Sep-14   $7,500
Hull Number DY 160   Ultramax   63,500       2015   N/A    
Hull Number DY 161   Ultramax   63,500       2016   N/A    
Total Dry Bulk Vessels   6   389,074                
Container Carriers                        
EVRIDIKI G (ex-MAERSK NOUMEA)   Intermediate   34,677   2,556   2001   TC 'til April-14   $8,000
TIGER BRIDGE   Intermediate   31,627   2,228   1990   TC till June-14
+6 months in Charterers Option
  $6,800

$9,500
AGGELIKI P   Intermediate   30,360   2,008   1998   TC 'til Sep-14   $6,950
DESPINA P   Handy size   33,667   1,932   1990   TC 'til Sep-14   $6,950
CAPTAIN COSTAS
(ex-OEL TRANSWORLD)
 
Handy size
 
30,007
 
1,742
 
1992
  TC 'til Mar-14
+12 months in Charterers Option
  $6,500

$11,500
MARINOS (ex-YM PORT KELANG, ex-MASTRO NICOS, ex- YM XINGANG I)   Handy size   23,596   1,599   1993   TC 'till Apr -14   $7,150
JOANNA   Handy size   22,301   1,732   1999   TC 'till April - 14   $7,500
MANOLIS P   Handy size   20,346   1,452   1995   TC 'til May-14   $7,200
NINOS   Feeder   18,253   1,169   1990   TC 'til Oct-14   $8,200
KUO HSIUNG   Feeder   18,154   1,169   1993   TC till Mar-14 +
12 months in Charterers Option
  $7,700

$11,500
Total Container Carriers   10   262,988   17,587            
Fleet Grand Total   16   652,062   17,587            
                         
                         

Summary Fleet Data:

...
                 
                 
    3 months, ended
December 31, 2012
  3 months, ended
December 31, 2013
  Year ended
December 31, 2012
  Year ended
December 31, 2013
FLEET DATA                        
Average number of vessels (1)   15.00     14.00     15.21     14.56  
Calendar days for fleet (2)   1,380.0     1,288.0     5,566.0