Euroseas Ltd. Reports Results for the Quarter Ended March 31, 2022, Announces Share Repurchase Program and Declares Quarterly Common Stock Dividend
Research, News, and Market Data on Euroseas Ltd
ATHENS, Greece, May 23, 2022 (GLOBE NEWSWIRE) — Euroseas Ltd. (NASDAQ: ESEA, the “Company” or “Euroseas”), an owner and operator of container carrier vessels and provider of seaborne transportation for containerized cargoes, announced today its results for the three-month period ended March 31, 2022 and a share repurchase program and declared a common stock dividend.
First Quarter 2022
Financial Highlights:
- Total net revenues of $45.4 million. Net income and net income attributable to common shareholders of $29.9 million or $4.15 and $4.13 earnings per share basic and diluted, respectively. Adjusted net income attributable to common shareholders1 for the period was $26.8 million or $3.71 and $3.70 per share basic and diluted, respectively.
- Adjusted EBITDA
1 was $31.1 million.
- An average of 16.0 vessels were owned and operated during the first quarter of 2022 earning an average time charter equivalent rate of $33,986 per day.
- The Board of Directors has approved a share repurchase program for up to a total of $20 million of the Company’s common stock. The Board will review the program after a period of 12 months. Share repurchases will be made from time to time for cash in open market transactions at prevailing market prices or in privately negotiated transactions. The timing and amount of purchases under the program will be determined by management based upon market conditions and other factors. The program does not require the Company to purchase any specific number or amount of shares and may be suspended or reinstated at any time at the Company’s discretion and without notice.
- Declared a quarterly dividend of $0.50 per share for the first quarter of 2022 payable on or about June 16, 2022 to shareholders of record on June 9, 2022. This dividend reinstates the Company’s common stock dividend plan.
Recent developments
- At the beginning of May we agreed to acquire M/V “Rena P” (ex. Seaspan Melbourne) and M/V “Emmanuel P” (ex. Seaspan Manila), both intermediate size container vessels with capacity of 4,250 teu each, built in 2007 and 2005, respectively. The vessels are being acquired for a combined price of $37 million and are expected to be delivered to the Company within May and June 2022, respectively. The Company will also assume the existing charter arrangements of the vessels as noted in the fleet profile below. Both acquisitions will be initially financed with the Company’s own funds.
- In mid-May the Company exercised its option to proceed with 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 2024. The total consideration for these two newbuilding contracts is approximately $86 million and will be financed with a combination of debt and equity.
Aristides Pittas,
Chairman and CEO of Euroseas commented: “Despite their recent small correction, the containership feeder charter rates have remained at levels near historical highs resulting in increased profitability for Euroseas. In parallel, expectations of continuing strength of the charter market have allowed us to charter forward the first two newbuildings of our 9-vessel newbuilding program at rates that will allow us to fully recover their construction cost over the 3-year duration of the charters. While the inefficiencies of the transportation system introduced by the COVID pandemic, that effectively reduce supply of ships, remain, uncertainties have been introduced by the on-going Ukraine-Russia conflict and increased levels of inflation that could affect economic growth and, thus, demand for shipping. We expect the market to remain strong in the near and medium term and are monitoring the above trends which alongside with new regulation on greenhouse gas emissions and expected increased new vessel deliveries will shape our markets.
“Within this environment, we continuously look for investment and other opportunities that will allow us to maximize returns to our shareholders. Our investment strategy is focused either on placing newbuilding orders that also enhance the environmental footprint of our company, or, secondhand vessels with simultaneous charters that bring their cost basis to below historical average levels by the end of the charter, thus, providing us the option for upsized returns.
“Overall, we are determined to remain a significant participant in the feeder containership market and grow the company. Our charter coverage provides earnings visibility well into 2024. Despite that, our stock trades at levels that do not reflect the mere value of our contracted earnings let alone the net asset value of the company, thus, representing one of the most attractive investment opportunities for us. In that spirit, our Board of Directors has authorized a $20 million stock repurchase program which management may use at its discretion. Our Board believes that our increased profitability and earnings visibility should be used to restore our dividend policy which had run continuously from 2005 until 2013 and had been paused during the tough last decade. Our Board decided to use a small part of our contracted earnings which will not alter our growth philosophy to reward our shareholders and declared a common stock dividend of $0.50 per share.
“We are very pleased with these developments and we look forward to continuing to chart a very profitable future for our shareholders and investors.”
Tasos Aslidis, Chief
Financial Officer of Euroseas commented: “The results of the first quarter of 2022 reflect the strong market charter rates our vessels earned compared to the same period of last year. Our net revenues increased to $45.4 million in the first quarter of 2022 compared to $14.3 million during the same period of last year due to the higher number of vessels we operated in the first quarter of 2022 and the higher market rates earned by our vessels. During the first quarter of 2022 we operated 16.0 vessels versus 14.0 vessels during the same period of last year.
“On a per-vessel-per-day basis, our vessels earned a 180.1% higher average charter rate in the first quarter of 2022 as compared to the same period of 2021. Again, on a per-vessel-per-day basis, the sum of vessel operating expenses, management fees and general and administrative expenses increased by 5.3% during the first quarter of 2022 as compared to the same period in 2021 which was attributable mainly to an increase in hull and machinery insurance premiums, the increased crewing costs resulting from difficulties in crew rotation due to COVID-19 related restrictions and the increased lubricants oil costs as a result of the war in Ukraine for our vessels compared to the same period of 2021. 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.
“Adjusted EBITDA during the first quarter of 2022 was $31.1 million compared to $5.6 million achieved for the first quarter of 2021.
“Finally, as of March 31, 2022, our outstanding debt (excluding the unamortized loan fees) is about $112.1 million versus restricted and unrestricted cash of about $54.1 million.”
First Quarter 2022 Results:
For the first quarter of 2022, the Company reported total net revenues of $45.4 million representing a 217.1% increase over total net revenues of $14.3 million during the first quarter of 2021. On average, 16.0 vessels were owned and operated during the first quarter of 2022 earning an average time charter equivalent rate of $33,986 per day compared to 14.0 vessels in the same period of 2021 earning on average $12,134 per day. The Company reported a net income and a net income attributable to common shareholders for the period of $29.9 million, as compared to a net income of $3.8 million and a net income attributable to common shareholders of $3.6 million for the first quarter of 2021.
Vessel operating expenses for the first quarter of 2022 amounted to $8.4 million as compared to $6.9 million for the same period of 2021. The increased amount is due to the higher number of vessels owned and operated in the first quarter of 2022 compared to the corresponding period of 2021, partly offset by the increased crewing costs, for our vessels compared to the same period of 2021, resulting from difficulties in crew rotation due to COVID-19 related restrictions, the higher prices in the supply of lubricants and the increase in hull and machinery insurance premiums. Depreciation expense for the first quarter of 2022 amounted to $3.7 million compared to $1.6 million for the same period of 2021 due to the increased number of vessels in the Company’s fleet 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. Related party management fees for the first quarter of 2022 increased to $1.2 million from $1.1 million for the same period of 2021 for the same reason. In the first quarter of 2022 two of our vessels completed their intermediate survey in water and one of our vessels completed her special survey with drydock for a total cost of $1.8 million. In the same period of 2021, none of our vessels underwent drydocking and certain expenses were incurred in connection with upcoming drydockings. Finally, during the first quarter of 2022 and 2021, we had other operating expenses of $0.35 million and other operating income of $0.2 million, respectively, relating to settlement of accounts with charterers.
Interest and other financing costs for the first quarter of 2022 amounted to $1.0 million compared to $0.7 million for the same period of 2021. This increase is due to the increased amount of debt and the increase in the weighted average LIBOR rate in the current period compared to the same period of 2021. For the three months ended March 31, 2022 the Company recognized a $2.34 million gain on its interest rate swap contracts, comprising a $0.04 million realized loss and a $2.38 million unrealized gain. For the three months ended March 31, 2021 the Company recognized a $0.48 million loss on its interest rate swap contract, comprising a $0.52 million unrealized loss and a $0.04 million realized gain.
Adjusted EBITDA1 for the first quarter of 2022 was $31.1 million, compared to $5.6 million achieved for the first quarter of 2021. Please see below for Adjusted EBITDA reconciliation to net income.
Basic and diluted earnings per share for the first quarter of 2022 was $4.15 and $4.13, respectively, calculated on 7,221,941 basic and 7,254,593 diluted weighted average number of shares outstanding compared to basic and diluted earnings per share of $0.53 for the first quarter of 2021, calculated on 6,711,408 basic and 6,749,393 diluted weighted average number of shares outstanding.
Excluding the effect on the income attributable to common shareholders for the quarter of the unrealized gain 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 per share for the quarter ended March 31, 2022 would have been $3.71 and $3.70 per share basic and diluted, respectively, compared to adjusted earnings of $0.45 per share basic and diluted for the first quarter of 2021, after excluding unrealized gain on derivatives and loss on sale of a vessel. Usually, security analysts do not include the above items in their published estimates of earnings per share.
Fleet Profile:
The Euroseas Ltd. fleet profile is as follows:
|
Vessels
under construction
|
Type
|
Dwt
|
TEU
|
To be delivered
|
Employment
|
TCE Rate ($/day)
|
|
GREGOS (*) (H4201)
|
Feeder
|
37,237
|
2,800
|
Q1 2023
|
TC until Mar-26
|
$48,000
|
|
TERATAKI (*) (H4202)
|
Feeder
|
37,237
|
2,800
|
Q2 2023
|
TC until Jun-26
|
$48,000
|
|
TENDER SOUL (H4236)
|
Feeder
|
37,237
|
2,800
|
Q4 2023
|
|
|
|
LEONIDAS Z (H4237)
|
Feeder
|
37,237
|
2,800
|
Q1 2024
|
|
|
|
MONICA (H4248)
|
Feeder
|
22,262
|
1,800
|
Q1 2024
|
|
|
|
STEPHANIA K (H4249)
|
Feeder
|
22,262
|
1,800
|
Q2 2024
|
|
|
|
PEPI STAR (H4250)
|
Feeder
|
22,262
|
1,800
|
Q2 2024
|
|
|
|
DEAR PANEL (H4251)
|
Feeder
|
37,237
|
2,800
|
Q4 2024
|
|
|
|
SYMEON P (H4252)
|
Feeder
|
37,237
|
2,800
|
Q4 2024
|
|
|
|
Total
under construction
|
9
|
290,208
|
22,200
|
|
|
|
Note: (*)(+) TC denotes time charter. Charter duration indicates the earliest redelivery date; All dates listed are the earliest redelivery dates under each TC 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 containerships. It is based on assessments of the current day charter rates of six selected containership 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.
(***) Rate is net of commissions (which are typically 5-6.25%)
Summary Fleet Data:
|
|
Three Months Ended
March 31,2021
|
Three Months Ended
March 31,2022
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
Time charter revenue
|
14,916,567
|
47,119,092
|
|
Commissions
|
(607,249)
|
(1,745,554)
|
|
Net revenues
|
14,309,318
|
45,373,538
|
|
|
|
|
|
Operating
expenses / (income)
|
|
|
|
Voyage expenses
|
127,409
|
354,024
|
|
Vessel operating expenses
|
6,864,353
|
8,398,893
|
|
Drydocking expenses
|
82,209
|
1,787,926
|
|
Vessel depreciation
|
1,596,543
|
3,721,116
|
|
Related party management fees
|
1,086,405
|
1,172,032
|
|
Loss on sale of vessel
|
9,417
|
–
|
|
General and administrative expenses
|
760,977
|
983,072
|
|
Other operating (income) / expenses
|
(216,496)
|
350,000
|
|
Total operating expenses, net
|
10,310,817
|
16,767,063
|
|
|
|
|
|
Operating
income
|
3,998,501
|
28,606,475
|
|
|
|
|
|
Other
income / (expenses)
|
|
|
|
Interest and other financing costs
|
(694,307)
|
(1,014,431)
|
|
Gain on derivatives, net
|
484,910
|
2,342,517
|
|
Foreign exchange (loss) / gain
|
(241)
|
1,052
|
|
Interest income
|
1,214
|
681
|
|
Other (expenses) / income, net
|
(208,424)
|
1,329,819
|
|
|
|
|
|
Net income
|
3,790,077
|
29,936,294
|
|
Dividend Series B Preferred shares
|
(138,269)
|
–
|
|
Preferred deemed dividend
|
(86,356)
|
–
|
|
Net income attributable to common
shareholders
|
3,565,452
|
29,936,294
|
|
Earnings per share, basic
|
0.53
|
4.15
|
|
Weighted average number of shares, basic
|
6,711,408
|
7,221,941
|
|
Earnings per share, diluted
|
0.53
|
4.13
|
|
Weighted average number of shares, diluted
|
6,749,393
|
7,254,593
|
Euroseas Ltd.
Unaudited Consolidated Condensed Balance Sheets
(All amounts expressed in U.S. Dollars – except number of shares)
|
|
Three Months
Ended March 31,
2021
|
Three Months
Ended March 31,
2022
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
Net income
|
3,790,077
|
29,936,294
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
Vessel depreciation
|
1,596,543
|
3,721,116
|
|
Amortization of deferred charges
|
49,280
|
83,496
|
|
Share-based compensation
|
28,765
|
214,559
|
|
Loss on sale of vessel
|
9,417
|
–
|
|
Unrealized gain on derivatives
|
(527,775)
|
(2,383,764)
|
|
Amortization of fair value of below market time charters acquired
|
–
|
(1,218,240)
|
|
Changes in operating assets and liabilities
|
1,422,694
|
(130,692)
|
|
Net
cash provided by operating activities
|
6,369,001
|
30,222,769
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
Cash paid for vessels under construction
|
–
|
(1,732)
|
|
Cash paid for vessels acquisitions and capitalized expenses
|
–
|
(281,300)
|
|
Cash paid for vessel improvements
|
(208,457)
|
(403,928)
|
|
Net
cash used in investing activities
|
(208,457)
|
(686,960)
|
|
Cash flows from financing activities:
|
|
|
|
Redemption of Series B preferred shares
|
(2,000,000)
|
–
|
|
Proceeds from issuance of common stock, net of commissions paid
|
743,552
|
–
|
|
Preferred dividends paid
|
(91,607)
|
–
|
|
Repayment of long-term bank loans
|
(2,185,460)
|
(6,885,460)
|
|
Repayment of related party loan
|
(2,500,000)
|
–
|
|
Offering expenses paid
|
(60,357)
|
(27,838)
|
|
Net
cash used in financing activities
|
(6,093,872)
|
(6,913,298)
|
|
|
|
|
|
Net increase in cash, cash equivalents, and restricted cash
|
66,672
|
22,622,511
|
|
Cash, cash equivalents, and restricted cash at beginning of period
|
6,338,177
|
31,498,229
|
|
Cash,
cash equivalents, and restricted cash at end of period
|
6,404,849
|
54,120,740
|
|
Cash
breakdown
|
|
|
|
Cash and cash equivalents
|
3,629,150
|
49,151,500
|
|
Restricted cash, current
|
341,432
|
169,240
|
|
Restricted cash, long term
|
2,434,267
|
4,800,000
|
|
Total
cash, cash equivalents, and restricted cash shown in the statement of cash
flows
|
6,404,849
|
54,120,740
|
|
|
|
|
Euroseas Ltd.
Reconciliation of Adjusted EBITDA to
Net Income
(All amounts expressed in U.S. Dollars)
|
|
Three Months Ended
March 31, 2021
|
Three Months Ended
March 31, 2022
|
|
Net
income
|
3,790,077
|
|
29,936,294
|
|
|
Unrealized gain on derivatives
|
(527,775
|
)
|
(2,383,764
|
)
|
|
Loss on sale of vessel
|
9,417
|
|
–
|
|
|
Amortization of below market time charters acquired
|
–
|
|
(1,218,240
|
)
|
|
Depreciation charged due to increase in vessel value from below market time charter acquired
|
–
|
|
494,808
|
|
|
Adjusted
net income
|
3,271,719
|
|
26,829,098
|
|
|
Preferred dividends
|
(138,269
|
)
|
–
|
|
|
Preferred deemed dividend
|
(86,356
|
)
|
–
|
|
|
Adjusted
net income attributable to common shareholders
|
3,047,094
|
|
26,829,098
|
|
|
Adjusted earnings per share, basic
|
0.45
|
|
3.71
|
|
|
Weighted average number of shares, basic
|
6,711,408
|
|
7,221,941
|
|
|
Adjusted earnings per share, diluted
|
0.45
|
|
3.70
|
|
|
Weighted average number of shares, diluted
|
6,749,393
|
|
7,254,593
|
|
Adjusted net income and Adjusted earnings per share Reconciliation:
Euroseas Ltd. considers Adjusted net income to represent net income before unrealized gain on derivatives, loss on sale of vessel, amortization of below market time charters acquired and depreciation charged due to increase in vessel value from below market time charter acquired. Adjusted net income and Adjusted earnings per share is included herein because we believe it assists our management and investors by increasing the comparability of the Company’s fundamental performance from period to period by excluding the potentially disparate effects between periods of unrealized gain on derivatives, loss on sale of vessel, amortization of below market time charters acquired and depreciation charged due to increase in vessel value from below market time charter acquired, which items may significantly affect results of operations between periods.
Adjusted net income and Adjusted earnings per share do not represent and should not be considered as an alternative to net income or earnings per share, as determined by GAAP. The Company’s definition of Adjusted net income and Adjusted earnings per share may not be the same as that used by other companies in the shipping or other industries.
About Euroseas Ltd.
Euroseas Ltd. was formed on May 5, 2005 under the laws of the Republic of the Marshall Islands to consolidate the ship owning interests of the Pittas family of Athens, Greece, which has been in the shipping business over the past 140 years. Euroseas trades on the NASDAQ Capital Market under the ticker ESEA.
Euroseas operates in the container shipping market. Euroseas’ operations are managed by Eurobulk Ltd., an ISO 9001:2008 and ISO 14001:2004 certified affiliated ship management company, which is responsible for the day-to-day commercial and technical management and operations of the vessels. Euroseas employs its vessels on spot and period charters and through pool arrangements.
The Company has a fleet of 18 vessels, including 10 Feeder containerships and 8 Intermediate containerships. Euroseas 18 containerships have a cargo capacity of 58,871 teu. After the delivery of nine feeder containership newbuildings in 2023 and 2024, Euroseas’ fleet will consist of 27 vessels with a total carrying capacity of 81,071 teu.
Forward Looking Statement
This press release contains forward-looking statements (as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) concerning future events and the Company’s growth strategy and measures to implement such strategy; including expected vessel acquisitions and entering into further time charters. Words such as “expects,” “intends,” “plans,” “believes,” “anticipates,” “hopes,” “estimates,” and variations of such words and similar expressions are intended to identify forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. These statements involve known and unknown risks and are based upon a number of assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the Company. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to changes in the demand for containerships, competitive factors in the market in which the Company operates; risks associated with operations outside the United States; and other factors listed from time to time in the Company’s filings with the Securities and Exchange Commission. The Company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based.
Visit the Company’s
website www.euroseas.gr
