Euroseas Ltd. Reports Results for the Fourth Quarter and Year Ended December 31, 2009.
Euroseas Ltd., an owner and operator of drybulk and container carrier vessels and provider of seaborne transportation for drybulk and containerized cargoes, announced yesterday its results for the fourth quarter of 2009 and year ended December 31, 2009. Aristides Pittas, Chairman and CEO of Euroseas commented: "2009 was a difficult year for Euroseas, as for most shipping companies, as rates declined dramatically compared to the summer and fall of 2008. And, while drybulk rates rebounded by early spring of 2009, containership rates have stayed at historically low levels since. In this challenging environment, we have been fortunate to reap the benefits of our risk management program which in 2008 enabled us to avoid investing in vessels at the peak of the markets. As a result, the huge decline of the markets in 2009 found us with a very strong balance sheet -- lots of cash and low leverage -- which enabled us to not only withstand the low rate environment but use the depressed markets as an opportunity to renew our fleet at a fraction of the cost compared to 2008. In total, we bought 3 drybulk vessels of an average age of about 11 years while we sold our 4 oldest vessels with an average age of about 25 years (3 bulkers and 1 containership).
However, despite our successful fleet renewal, our results for the fourth quarter 2009 and 2009 as a whole were affected by the state of the containership market and by our decision early in 2009 to hedge our drybulk exposure in the FFA markets.
Looking forward into 2010, we expect on the one hand the containership market to remain at very low levels and on the other hand the drybulk market to be quite volatile affected by an emerging markets -- primarily Chinese-led -- recovery and quite a number of scheduled vessel deliveries. As a result, we have currently covered 100% of our drybulk capacity for 2010 at profitable levels, including half of it hedged with FFA contracts, and about 45% of our container available days although the latter at rates that are just covering -- on average -- operating costs. At the same time, we continue to look at the containership markets as a great opportunity to invest in more modern vessels at historically low prices, and to that effect we have been building our strategy over the last 6 months. The closing of our agreement to form a new vehicle together with Eton Park and Rhone Capital, two private investment firms, to exploit the opportunities we currently see arising on a bigger scale has been somewhat delayed but we remain confident that this deal will close within the first quarter of 2010.
Our Board confirmed its intention to continue paying dividends to our shareholders throughout the market cycles in parallel with our expansion program, as far as practically possible. In that respect we are happy to have declared a quarterly dividend of $0.05 per share which represents an annualized yield of about 5% on the basis of our stock price on February 26, 2010."
Tasos Aslidis, Chief Financial Officer of Euroseas commented: "The results of the full year of 2009 reflect significantly lower revenues compared to 2008 due to the lower average time charter equivalent rate our vessels have achieved during the year. Our results for the fourth quarter 2009 were also lower compared to the same period for 2008. Our results were also negatively affected by the loss on the sale of two vessels in December 2009, m/v Artemis and m/v Gregos, settlement of certain interest rate swaps and FFA contracts in 2009 and other non-cash losses on interest rate derivatives, FFAs and declines in value of a small amount of securities held.
Daily vessel operating expenses, including management fees, during 2009 reflect a decrease of about 16% on a per vessel per day basis compared to 2008. A little more than half of this decrease is due to the fact that three of our vessels were laid-up during most of 2009. Even after adjusting for this factor, we maintain one of the lowest operating cost structures amongst the public shipping companies which, we believe, is one of our competitive advantages and a significant part of our overall strategy. We will continue to focus on controlling and reducing our costs while ensuring safe operations.
We have been and are currently satisfying all our debt covenants. At the end of 2009, our outstanding debt was about $71.5 million versus unrestricted cash and cash in retention accounts of more than $48 million. Our scheduled debt repayments in 2010 are about $14 million, a number low enough to provide us with operational cash flow comfort. We estimate that our cash flow breakeven for 2010 including debt repayments but excluding dividend payments is around $10,000 per vessel per day."
Fourth Quarter 2009 Results:
For the fourth quarter of 2009, the Company reported total net revenues of $16.5 million representing a 30.2% decrease over total net revenues of $23.6 million during the fourth quarter of 2008. The Company reported a net loss for the period of $16.3 million as compared to net loss of $22.2 million for the fourth quarter of 2008. The results for the fourth quarter of 2009 include a $9.0 loss from the sale of two vessels and a $9.9 million loss on derivatives and trading securities as compared to $4.8 million loss on derivatives and trading securities for the same period of 2008. On average, 16.7 vessels were operated during the fourth quarter 2009 earning an average time charter equivalent rate of $13,892 per day compared to 16.0 vessels in the same period 2008 earning on average $17,420 per day.
Adjusted EBITDA for the fourth quarter of 2009 was $0.4 million, a 96.3% decrease from $11.4 million achieved during the fourth quarter of 2008. Please see below for Adjusted EBITDA reconciliation to net income and cash flow provided by operating activities.
Basic and diluted loss per share for the fourth quarter of 2009 was $0.53, calculated on 30,813,960 weighted average number of shares outstanding compared to basic and diluted loss per share of $0.73 for the fourth quarter of 2008, calculated on 30,520,584 weighted average number of shares outstanding.
Excluding the effect on the loss for the quarter of the loss on sale of vessels, unrealized loss on trading securities and derivatives, and amortization of the fair value of time charter contracts acquired the loss per share for the quarter ended December 31, 2009 would have been $0.15 per share basic and diluted compared to earnings of $0.24 per share basic and diluted for the quarter ended December 31, 2008. Usually, security analysts do not include the above items in their published estimates of earnings per share.
The Company has declared a quarterly dividend of $0.05 per share, which represents its eighteenth consecutive quarterly dividend and a 50% decrease over last year's fourth quarter dividend, reflecting the much worse market conditions for the Company's containerships. The dividend is payable on March 26, 2010 to shareholders of record as of March 17, 2010.
Year Ended December 31, 2009 Results:
For the year ended December 31, 2009, the Company reported total net revenues of $63.8 million representing a 49.5% decrease compared to 2008. Net loss for the year amounted to $15.6 million compared to a net income for 2008 of $21.5 million. The results for the year also include a $9.0 million loss from the sale of two vessels and a $15.4 million loss on derivatives and trading securities as compared to $5.5 million loss on derivatives and trading securities inclusive of dividend income for the same period of 2008.
Adjusted EBITDA for the year was $17.4 million, a 75.8% decrease over 2008 (please see below for Adjusted EBITDA reconciliation to net income / loss and cash flow from operating activities). In the year ended December 31, 2008, net revenues were $126.3 million, net income was $21.5 million and Adjusted EBITDA was $72.0 million. On average,16.3 vessels were operated during the year 2009 earning an average time charter equivalent rate of $13,698 per day compared to 15.6 vessels in the same period 2008 earning a time charter equivalent rate of $23,695.
Basic and diluted losses per share for the year ended December 31, 2009 were $0.51 calculated on 30,648,991 weighted average number of shares outstanding, compared to basic earnings per share of $0.71 and diluted earnings per share of $0.70 for 2008 calculated on 30,437,107 and 30,505,476 weighted average number of shares outstanding, respectively.
Excluding the effect on the loss for the year of the loss on sale of vessels, unrealized loss on trading securities and derivatives, and the amortization of the fair value of time charter contracts acquired the loss per share for the year ended December 31, 2009 would have been $0.09 per share basic and diluted, while for the year ended December 31, 2008 the earnings per share would have been $1.51 per share basic and $1.50 per share diluted. Usually, security analysts do not include the above in their published estimates of earnings per share.
Change in accounting principle and change in estimates:
Beginning with the first quarter of 2009, the Company changed its accounting policy of drydocking costs from the deferral method, under which the Company amortized drydocking costs over the estimated period of benefit between dry-dockings, to the direct expense method, under which the Company expenses all drydocking costs as incurred. The Company believes that the direct expense method is preferable as it eliminates the significant amount of time and subjectivity involved in determining which costs and activities related to drydocking qualify for the deferral method. When the accounting principle was retrospectively applied, net income for the year ended December 31, 2008 decreased by $2.2 and net loss for the quarter ended December 31, 2008 decreased by $0.3 million, or $0.07 and $0.01 per share, respectively, basic and diluted.
The Company reflected this change as a change in accounting principle from an accepted accounting principle to a preferable accounting principle in accordance with FASB ASC 250-10 Accounting Changes and Error Corrections. The new accounting principle will be applied retrospectively to all periods presented in earnings releases and filings.
During the fourth quarter of 2008, the Company also changed its estimates of the scrap price and useful life of its containerships to better reflect the present market environment, industry practice and intended use. The effect of these changes decreased net loss for the three month period and year ended December 31, 2009 by $1.6 and $6.4 million, respectively, or $0.05 and $0.21 per share, respectively, basic and diluted.