Euroseas Ltd. (ESEA) Q1 2018 Earnings Report, Transcript and Summary

Thank you for standing by, ladies and gentlemen, and welcome to the Euroseas Conference Call on the First Quarter 2018 Financial Results. We have with us Mr. Aristides Pittas, Chairman and Chief Executive Officer; and Mr. Tasos Aslidis, Chief Financial Officer of the Company. At this time, all participants are in a listen-only mode. [Operator Instructions] I must advise you that this conference is being recorded today. Please be reminded that the Company announced their results with a press release that has been publicly distributed. Before passing the floor to Mr. Pittas, I would like to remind everyone that in today's presentation and conference call, Euroseas will be making forward-looking statements. These statements are within the meaning of the Federal Securities Laws. Matters discussed may be forward-looking statements which are based on current management expectations that involve risks and uncertainties that may result in such expectations not being realized. I kindly draw your attention to Slide Number 2 of the webcast presentation which has the full forward-looking statement, and the same statement was also included in the press release. Now, I'd like to pass the floor to Mr. Pittas. Please go ahead.

Good morning, ladies and gentlemen, and thank you all for joining us today for our scheduled conference call. Together with me is Tasos Aslidis, our Chief Financial Officer. The purpose of today's call is to discuss our financial results for the three-month period ended March 31, 2018 and our drybulk spin-off. Let's turn to Slide 4 of our presentation for our key 2018 developments to-date. Yesterday on May 7, 2018, we completed our newbuilding program that was started in 2014 by taking delivery of newbuilding motor vessel, Ekaterini; and 82,000 deadweight drybulk vessel that has been already charted to highly reputable European charter for about two years at a gross daily rate of $13,000. And this is expected to contribute approximately $9 million of net revenues during the contract period. We secured a bank loan of about $18.4 million to finance the acquisition of the vessel of which $15.75 million was paid to the yard as the final installment. However, from our perspective, the more significant development during the quarter was our decision to spin-off our drybulk fleet into a separate publicly listed company, EuroDry Ltd. We believe the certain drybulk and containership investment options will give our shareholders the flexibility to adjust the holdings if they show wish between the two sectors. We also anticipate that the creation of sector-focused companies will allow the capital markets to appreciate the value of our companies. Further value can be created if we are successful in our goal of turning our public platforms to consolidate in their respective fields. The EuroDry Ltd. will be a middle range drybulk owner and Euroseas Ltd. will become the only feed of containership public company with a fleet of 11 vessels and are proven workhorses of the sector. We direct to the registrational statement filed by EuroDry for information on the new company, it's www.sec.gov/Archives/edgar/data/1731388/000091957418003321/d7869256_f-1.htm. I repeat, you can find the information of the new company at www.sec.gov/Archives/edgar/data/1731388/000091957418003321/d7869256_f-1.htm. 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 will both be well positioned to do; so both in terms of the capital structure and the contract mix. We expect to complete the spin-off by the end of May 2018. 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 10:00 AM Eastern Time. Let's turn to Slide 5 for our other operational highlights of the quarter. As part of our drybulk fleet renewal program, on April 11 we announced the sale of motor vessel Monica P for 46,000 deadweight vessel built in 1998 and affiliated third-party for the gross amount of $6.45 million. The vessel will be delivered to it's buyers by June 30, 2018. This vessel was replaced with motor vessel Ekaterini I just told you about. As for special surveys and drydocks, we had three vessels due this quarter; a disproportionate number as normally this is less than one and which was the main reason of our loss this quarter. Our motor vessel, Monica P, Pantelis and Tasos all underwent drydocks for a total consideration of $2.2million during the quarter resulting also in 73 days off-hire. Also during the quarter the Akinada Bridge was idle for about 23 days waiting for employment as at the last moment we didn't manage with existing charters. End of April, our containership EM Astoria suffered propeller damage and will require repairs to prevent the vessel from trading. We are making every possible effort for the vessel to resume trading in the shortest possible time. But even though insurance will cover all repair costs, we will lose the revenues it would otherwise produce during this time. Turning to Slide 6; Eurobulk, our manager continues to keep our costs low. Our daily cost per vessel for the first quarter 2018 were higher than expected but we hope that during the year they will normalize to around our budget level. The graph in the page compares daily costs excluding drydocking since 2008 with our peers. Overall, our costs remain among the lowest amongst the publicly shipping companies. For the first quarter of 2018, our operational fleet utilization was 99.7%, and commercial fleet utilization was 98.4%. I now want to pass the floor over to our CFO, Tasos Aslidis, to take you through our financials in more detail.

Thank you very much, Aristides. Good morning from me as well, ladies and gentlemen. Let's turn to Slide 8, and as Aristides brief introduction on a few minutes ago, although our revenues continued to increase in the first quarter of 2018 following the continued improvement in both, drybulk and containership markets, we registered a loss for the first quarter of the year 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 the current levels and we expect the company to revert profitability for the remainder of the year. For the first quarter of 2018, we reported total net revenues of $12.9 million representing an 55.9% increase over total net revenues of $8.3 million during the first quarter of 2017. We reported a net loss for the period of $3.2 million and the 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 stakeholders of $2.6 million respectively for the first quarter of last year. In the first quarter of 2018, as Aristides mentioned, three vessels completed the special surveys with drydocks for a total cost of $2.2 million, while in the same period of last year we had only one vessel going through a survey and this was an in-water [ph] survey with a cost of $0.1 million. The results for the first quarter of 2017 also include a $0.5 million gain on the sale of our vessel RT-Duger [ph] compared to the same period of 2018 where we had no gains from vessel sales. The difference between net income and net income attributable to common shareholders of $5.2 million accounts for the dividend we paid to our Series B preferred shareholders in the first quarter of this year. This preferred dividend can be paid out entirely either in cash or in kind, and we have elected to pay it in kind for the last 17 quarters. Basic and diluted loss per share attributable for the first quarter of 2018 were $0.33 compared to basic and diluted loss per share of $0.24 for the first quarter of last year. Excluding the effect on the loss for the quarter of unrealized gain and derivatives, and the realized loss on derivatives, the adjusted loss per share for the quarter ended March 31, 2018, which have been $0.34 per share basic and diluted compared to a loss of $0.29 per share basic and diluted for the first quarter of last year making the same adjustments. Adjusted EBITDA for the first quarter of 2018 was a loss of $0.2 million compared to a gain of $0.2 million achieved for the first quarter of last year. Let's now turn to the next slide, Slide 9; in which slide we provide you with our fleet performance for the three months period ended March 31, 2018, and compared with the same performance over the first quarter of 2017. Let's start with our fleet utilization rates which as always we have broken down into commercial and operational. For the first quarter of this year we reported 98.4% commercial utilization rate and 99.7% operational utilization rate compared to 93.1% commercial and 98.3% operational utilization rate for the same period of 2017. I want to remind this year that our utilization rate circulation does not include vessels in scheduled drydock, scheduled repairs or layup if any during the reporting periods. In the first quarter of this year we operated 17 vessels with another time charter equivalent rate of $9,167 per vessel per day representing a 26% increase compared to the time charter equivalent rate of $7,268 per vessel per day that we achieved during the same period of 2017, a period during which we operated 13.38 vessels [ph]. Total operating expenses including management fees and general and administrative expenses but excluding drydocking costs were $6,756 per vessel per day for the first quarter of this year as compared to $5,675 per vessel per day for the first quarter of 2017, representing approximately a 19% increase, reflecting the different composition of vessels that we had in the two quarters, expenses related to our spin-off, and the timing of certain other expenses. And with that, let me send you back to Aristides to continue our presentation.

Thank you, Tasos. Let's now turn to Slide 11. We are very excited about the opportunity to spin-off the drybulk fleet into separate companies. Over the course of the last 20 years that included our entrance into the public markets as a diversified drybulk and container company, navigating successfully within one of the worst financial crisis in our history with a strong passion for ship operations and using a time-tested approach of focusing on cost control and lower-risk investments. We feel we have adapted well to the changing times and have grown our fleet by sitting the right opportunities without having to resolve to dilutive equity issuances other than a couple of rights issues to existing shareholders, no of course risking bankruptcy as several others. Now with two separate entities we are hopefully looking forward to the next success for our Company. Let's go to Slide 12; as stated in my introduction we are spinning off our six drybulk vessels into a separate company. The fleet will include the following vessels of our current fleet; three newbuildings consisting of two Kamsarmaxes and one Ultramax built according to our specifications. And three high quality Japanese-built Panamaxes all post-2000 built with an average fleet age just under 9 years. The net asset value of the vessels to be spun-off we calculate at about $35 million. Euroseas will continue with the current containership fleet of 11 vessels and will be the only public feeder containership focused company. We believe that the feeder sector is facing favorable demand/supply balance just as the drybulk sector is. The mechanics of the spin-off will be as follows: shares of the new entity will be distributed to Euroseas shareholders of record date for the spin-off expected to be May 23, 2018. The actual distribution is expected to happen on or about May 30, 2018. Please turn to Slide 14 for a snapshot of the fleets as of today. The drybulk fleet will comprise of six drybulk vessels with a cargo carrying capacity of 452,000 deadweight and a fleet average age of 8.9 years. After the sale of Monica P which was kept within Euroseas will be affected by June 30. Euroseas will have 11 container vessels with a total cargo capacity of 25,483 TEUs, and an average of just below 20 years. Turning to Slide 16 for highlights on the drybulk market. The BDI was at 1,230 points on January 2 and that ended at 1,055 on March 29; having reached a peak of 1,395 on January 9. Currently the BDI stands at 1,384 points as of May 4, 2018. As of March 1, 2018, the BDI composition is revised as follows: 40% Capesize, 30% Panamax and 30% Supramax. It will no longer include the Handysize time charter average; previously the Index was based equally on the four sizes. Daily Cape spot rates averaged $12,560 per day in Q1, Panamax spot rates averaged $11,560 and Supramax-58 spot rates averaged $12,700 per day. They closed the quarter at significantly lower at $7,375 for Cape's, $10,863 for Panamax, and $ 13,563 for Supra's. And currently they stand having increased again for Cape's at $18,308 but still lower for Panamax at $10,175, and $11,543 for Supramaxes-Tess 58 as of May 4. One-year time charter rates increased across all sizes: Capes from $17,000 approximately in Q4 to $18,850 for Q1 '18 average, Panamaxes from $12,150 per day in Q4 average to $13,350 per day, the Q1 '18 average. Supramaxes also increased from $10,885 per day in the Q4 '17 average to $12,385 per day, the Q1 '18 average. As of May 4, 2018, time charter rates stood at $20,750 per day for Cape's, the highest for a long time; $13,000 per day for Panamaxes, and $12,500 per day for Supramaxes. Secondhand five-year old vessel prices were flat during Q1. Newbuilding prices from China are in the region of $26 million to $24 million for Kamsarmax and Ultramax respectively. The fleet during this year has grown by nearly 1% year-to-date. Please turn to Slide 17 where you can review the drybulk profile and the order book delivery schedule. The delivery schedule for drybulk vessels in 2018 stood at 4.1% of the fleet at the beginning of the year. However, slippage and cancellations continued to occur and the actual number of deliveries in 2018 will be less than originally predicted. Overall, deliveries in 2018 should be the lowest of the last 10 years. The actual fleet could grow less than 2% in this year. Turning to Slide 18; the IMF projected GDP growth in 2018 is expected to be 3.9%, inline with the previous quarter estimate. China is expected by IMF to grow by a healthy 6.6%, and India is projected to grow by 7.4%, both in line with the previous quarter. The U.S. is now projected to grow by 2.9%, up by 0.2% from the previous quarter. Also Brazil is expected to have 2.3% growth in '18, up 0.4% from the previous quarter. And Russia is expected to grow by 1.7% which is inline with the previous quarter. Despite the solid GDP growth expected, according to classes [ph], the drybulk sector is now projected to grow by 2.7%, down from 2.8% from the previous quarter and much lower than the 3.8% in 2017; this is mainly due to a dynamic [indiscernible] in China which however may surprise either way. Please turn to Slide 19 where we summarize our outlook on bulkers. The market in 2017 was characterized by robust demand and a depleting orderbook. One-year time charter earnings averaged 70% higher than 2016 but still well below historical average levels. For 2018 and 2019, we expect further improvements in the demand/supply balance. Barring any significant slow-down in Chinese iron ore and coal imports we should therefore see a stronger market. China as I said, remained the main source of drybulk trade growth. Iron ore imports, the largest contributor of drybulk trade growth have been strong but not as expected due to weather disruptions in Brazil; however, we expect good growth again in the second half of 2018. Similar trends are witnessed in coal imports as local coal mines have been shut down due to inefficiencies and pollution concerns. However, the reversal of this trend could negatively affect the very positive outlook. Just recently, the Chinese government announced restrictions for coal imports in five Southern and Eastern Chinese ports with unknown duration aiming to boost local coal prices and production. These policies are contradicting with Beijing's effort to curb pollution as local coal is of lower quality and it's production very polluting. Let's now turn to Slide 20 to review our drybulk employment schedule in the classical form. As you can see our drybulk average for 2018 stands at about 57% giving us significant capacity to benefit from a rising market. Having secured a two Kamsarmaxes till mid-2020 on profitable charters, we are pursuing a strategy of employing the remaining four of our vessels on short-term contracts or indexed contracts and expectation of further improvements in the market. Let's now move to Slide 21 to see our drybulk vessel debt repayment profile and cash flow breakeven. This slide shows on the right hand side the drybulk cash flow breakeven budget estimated over the next 12 months, and from the left side scheduled debt repayments including the scheduled balloon repayments over the next five years. You will notice in the graph that in 2018 the drybulk fleet has $2.8 million of balloon repayments, whilst in 2019 it will be $8 million more. Typically, and so far we have refinanced the biggest part of our balloon repayments as they come due; and we expect to continue to do so. Expressed in dollars per vessel per day, loan repayments over the next 12 months amount to about $3,300 per vessel per day contribution for the cash flow breakeven. You can see those numbers in the table on the right part of the side. If we make assumptions for the rest of the operating items as those operating expense, general and administrative expense, interest and drydock expenses on the progressive but debt basis. EuroDry has a breakeven level of around $10,8000 per day per vessel over the next 12 months without any balloon payments. Let's move to Slide 22; the left side of this slide shows the evolution of time charter rates of Panamax drybulk ships since 2001. While drybulk vessel rates have bounced back from their all-time lows in 2016, but we are still below historical average. The right hand side of the slide shows vessel values in relation to historical prices. Drybulk prices have moved above all-time low values as we've established at the beginning of 2016 but they are also still lower than historical average. Drybulk fundamentals today remain favorable for the foreseeable future provided of course that the industry does not shoot itself again in the foot by starting to order new ships which would create worries for 2020 onwards. Please turn to Slide 24 for highlights on the containership market. Time charter rates in Q1 for feeder and intermediate size vessels ranging from 1,000 to 5,000 TEUs have all risen about 15% to 20% on average. The 1,700 TEU geared vessel rose from an average of $8,300 a day in Q4 to $9,680 in Q1 and currently stands at $10,500 per day. The 2,500 TEU geared vessel rose from an average of $8,750 in Q4 to $9,820 in Q1 and currently stands at $10,500 a day. Average secondhand prices for older than 15-years old vessels rose circa 40% on average in Q1, however, for younger vessels of about 10-years old, the rises were slightly smaller as the older vessels were priced at around their scrap price in the previous quarter. Newbuilding prices were stable with rising trends. The rises are in the region of $500,000 per vessels sub-5000 TEU. But the idle fleet was low at 350,000 TEU as of mid-April. Scrapping was very slow in Q1, only about 25,000 TEUs were scrapped in Q1, amidst very firm scrap prices but in anticipation of a better market, owners avoided scrapping. The fleet grew by about 2% year-to-date without accounting for idle vessels reactivation. Slide 25 is a repeat of Slide 18 but we wanted to provide the IMF projections again for regional reference as we've done to the bottom of the page for the containerized trade covered into flagships [ph]. This is projected to grow by 5% which is the same as the previous quarter in 2018, and by about 4.8% in 2019. These are very healthy rates, even though they are lower than the 5.5% we witnessed in 2017. Containers have moved away from their all-time lows during the last two quarters but are still below the historical averages. We believe the current valuations still does not reflect the long-term revenue capacity of the vessels and would expect a further rise. Let's turn now to Slide 31; we believe the both shipping sectors are at an attractive point. The orderbook for both sectors is minimal and that one of the lowest levels of the last 15-years and with the world economies in a synchronized recovery, this should positively influence demand for shipping. Our focus is now to maximize shareholder value to increase stock attractiveness and move valuation closer to NAV while we address the challenges that remain including market capitalization, trade volume and fleet size. I now want to hand the call back to the operator to answer any questions that you may have.

[Operator Instructions] Our first question comes from the line of James Jang of Maxim Group.

So I just wanted to ask how many of your feeders are geared and how many are gearless?

I think it's about half and half; I believe out of the 11 ships I think actually we have 7 geared ships and 4 gearless.

Have you seen more interest on the geared or the gearless?

I think it's a uniform across the board, the interest is quite significant on all smaller vessels.

And rates have been moving up steadily; they are above the five-year average which is good. Do you see rates continue to move up and getting to the -- let's say 20 levels that we saw 10 years ago; $15,000 to $20,000 a day?

I think that it's possible that we see it move closer to the 15-year historical average which includes some very good years but also some worst years. So rates for feeders in the area of around $15,000 -- you can't exclude that possibility. But obviously, you know, even at today's rates of $10,000, $11,000, $12,000 maybe but we might see levels which are very profitable for Euroseas.

And for segments already where historical average, like the 1,700 TEU vessels are very near the historical average.

Yes, you have a couple of really nice charters there, above $10,000 or close to $12,000. So it looks like rate trajectory looks good. So going back to the Astoria; how many days off hire was there for the propeller repair?

This is something that happened about 10 days ago and we're still evaluating how long it will take to repair the propeller. We will need to find or manufacture a new blade for the propeller and this may take some time. It's difficult to say at this point how long that will be but it will be something I think in excess of 90 days.

So if we assume that it's out of service from -- I guess, the end of April to going into Q3, that will be fair, right?

I think that's a fair estimate at the time being. If we have more clarity we will obviously advise.

So now the spin-off of the drybulk fleet it's in place; so what are the plans for expanding the container side? I know you have a love in vessels right now; but you want -- is there a certain number you want to get to in terms of fleet size or are you okay operating 11 fleet vessel; I mean 11 fleet company at this time?

As you know, we have made it public that we want to grow the company and we think it's an opportune time to grow the company through various means; and what we are closely looking at the right now is an opportunity to consolidate with other container owners who wanted to contribute the vessels into Euroseas. So there is significant discussions going on that level, I can't tell you now if something will materialize or not but we are certainly looking to grow the size of the company.

And would that be 2018 event that you're aiming for or would that be more into '19?

It could be 2018 event of course, it could be a 2018 event.

And also so for -- I'm just going to stick with the container fleet right now.

So it could even be a Q3 event, not as early as that.

So on the container side, what's the current drydocking schedule for '18 and '19?

We have one drydock I think scheduled for Q2, and I don't think we have any survey requiring drydock -- any other surveys requiring drydock in 2018. For 2019, I'm not sure but we can brief you after the call.

Sure. And are you guys -- with these drydocks are you installing any wastewater treatment or scrubbers or anything or is it just maintenance drydocking?

No, these are the maintenance -- obligatory maintenance drydockings that every vessel has to do every 5 years; take the vessel out of the water and sometimes even every 2.5 years depending on the regulations.

So I guess you're not installing scrubbers on your vessels, correct?

No, we're not going to install scrubbers on any of our ships. Scrubbers will be in my view a short-term solution which will not last longer term and unless you have a very big ship consuming huge quantities of fuel, I don't think it really is something that will be done by most operators.

So if you do -- so 2020 moves around -- so you guys start burning low sulfur diesel; who bears the cost of that? Do you think charters are going to kind of push those costs to the owners or do you think that you'll be able to pass on those costs to the charters?

I think that 95% of the ships will not have the capacity to earn anything else. So we will all as owners be at the same level. At the end of the day the cost -- the increased cost go to the consumer; take a little bit of adjustment but that's the way the markets work.

And on the container side; have there been more increase recently for longer…

I think -- for longer charters you mean, right?

Yes. Have they -- because I know you guys like to be shorter term charters. All charters that's an equal longer terms?

Our strategy is to go for one-year charters when we can get charter rates higher than $10,000 a day for our feeder fleet. And sometimes we can get it, sometimes we can't; definitely the durations are becoming more specific, so owners are able to fix for specific periods rather than some vague periods that we were forced to accept during the bad times where we at times fixed charter for 1 to 10 months or things like that, that's past.

And now moving on to the drybulk side. Currently there is 7 vessels because the Monica P is still operating until the end of June, this trend [ph] charter, correct?

That is correct.

And so once the Monica P is delivered at the end of June what are the plans for expanding that fleet? Like are there any certain segments you're looking to grow into or are you going to just kind of take it case-by-case?

James, I can't really expand on the plans or EuroDry yet because we are still -- we just filed the prospectus to the SEC and we have to wait to be able to talk more about it. I think we will be able to talk more on our drybulk plans as of next Monday when we are going to host a conference call to discuss about EuroDry but right now we're not really allowed to talk a lot about it.

That's fair. And -- so we just talked broadly on the drybulk sector. With U.S. China kind of trade-war going on right now; how do you see that playing out? Do you think there is enough, I guess [indiscernible] demand outside of the U.S. to kind of help with the oversupply or do you think if this continues it will be a negative on rates for this year?

I think that on bulk products the trade between the U.S. and China is not that significant to play a huge role. So I'm not really worried about it; I'm worried only if this expands to a much big trade war globally. But where we are right now doesn't really frighten us that much. In fact, you know, even if there is a bigger trade war happening, usually these inefficiencies result in the need for more longer distance shipments rather than optimizing the trade. So that can be good for shipping if the global GDPs or not seriously affected. But inefficiencies it's something that helps shipping.

Yes, inefficiency is great fish. And -- so there are few more slides to took up in scrapping for the other vessels but there hasn't been that much in terms of the feeder side. Do you think that that's going accelerate this year or do you think it's going to be pretty much with rates being healthy?

I think it's a symptom of the lack of building the feeder ships over the last five years. There haven't been newbuild feeders being built or enough feeders being built and that is the reason we are seeing the awkward situation of 1,500 TEU ships earning more than Panamaxes in some cases. There is a lack of these ships and people have scrapped during the bad times the worst ships and they are now even upgrading ships that they didn't think that they would trade. So scrapping will be limited.

Our next question comes from the line of Tony Kamin of Eastwood Partners.

You may not be able to answer this and I note that you've said you were going to do another call in a week or so but I have read the F1 and I noted that there was $28 million in debt on the new -- on EuroDry balance sheet in -- I know you just gotten $18 million from -- on the Ekaterini, so I'm wondering whether that implies that $10 million of further debt will be off the containership side -- will essentially move over to the new company?

I think the debt that follows the vessel show basically the debt that you show on the work which has been filed will be increased by the new debt that we have assumed for the vessel that it was just levered. Mine whatever repayments you have been made to -- that will be no debt transfer between the two, we have a preferred shares that we would -- that would be allocated between the two companies.

Okay.

We will really provide more clarity and our company will be allowed by our lawyers to provide a much more clarity on Monday on the conference, on how to balance sheet of Euroseas changes and what goes into EuroDry exactly.

I appreciate that. I think it's a great idea, just -- it's obviously a little more clarity would be helpful. If the second question is really -- I'm concerned that we're questioning; have you started efforts to secure sort of public sponsorship for the new EuroDry company as a public company in terms of potentially getting research coverage, market maker coverage, ahead of time, so that the stock doesn't come out and just you know immediately be kind of without orphaned without any real sponsorship we're following?

I think you were said, if there are any questions on EuroDry for the time being, especially this type of questions. Sorry, if that's okay, we can revert on us setting call of this in the near-term in due course.

Thank you. Our last question comes from the line Paul Fract [ph] of Noble Capital. Please ask your question.

Good morning. And starting the presentation you stated that the Euro dry and net asset value was in the $35 million range. Do you have a similar number for your Euroseas right now?

I think we estimate that our Euroseas surprised trades, give or take around 40% of our next asset value. So you can infer from that what that translates to for the container apart. And then before you talked about consolidation up opportunities; and I just wanted to clarify that those consolidation opportunities that you were talking about were more in the container side at this point in time. Given you were reluctant to talk about the drive but our Euro, that is the case with working about the containers right now and I want to clarify -- you know, we'd be happy to talk as much as we are allowed to talk about the spinoff but we have to follow the rules and that's why we're trying and we have arranged this now coal on Monday to a little bit better about that company?

Yes, I guess I wanted to follow-up on just the interested that you're seeing from some private owners as far as combining with the Euroseas-X, the dry bone dividend or distribution. And is this the view where they're looking for liquidity, or a public market value or -- and if you could talk about the capital structure that you want to look forward on the container side; that would be helpful.

I think that the people who we are talking to air share our belief that they container markets are off their bottom and are expected to be doing well within the next few years. So therefore, what we are looking for is ideally companies that have a very similar capital structure to ours because that makes also the combination easier to do.

And then, I know it would ask before but I didn't -- it didn't sound like there was a clear answers. What is the optimal size whether it's on a deadweight turn or TEU or number of vessels on the container side, is it 20, is it 30 -- I mean, what your goal strategically to expand the fleet?

I think it's not easy to say from an operational point of view, a fleet of 10 vessels you can operate it as efficiently as you can operate the fleet of 50 vessels or 70 vessels as far as costs and chart and commercial operations really go. However, if you are least identity, you should be bigger and I think that is the main driver for growing the company into a very significant size, if we can find other people who want to contribute vessels into the entity. So the advantages of the capital markets are really gained as the size increases because then you can have bigger investors investing in the companies as well.

Yes, bigger scale makes sense and will there also be a focus on trying to improve the average age profile of the container fleet or are you satisfied that you can actually see consolidation in some of the older feeder containers and that be as attractive as trying to improve the average age.

Really, age for us is not the most crucial thing right, because the other ships are much cheaper and sometimes they earn equal amounts of money as younger ships; so they are good for positions at the certain periods in time. But obviously when you deal with elder ships, you have to make sure that you have good quality ships and that have been built to good specifications and now maintained well. Obviously, one has to renew the fleet and the fleet has to be renewed and at some point you need to scrap your older ships and this is something we will also be doing, renewing the fleet going forward but it's something which is not the top priority at this stage -- the top priority is to benefit from the markets that we expect that we're going to have the next few years, and make significant operational profits.

Great, thanks for your time and I look forward to the call on Monday.

Thank you. I'd now like to hand the floor back to Mr. Pittas for his closing remarks.

Thank you all for listening to our earnings call today for Q1 which obviously -- we spent a lot of time discussing the spin-off because it's a very transformational move for our Company, and we hope to have you all on our call on Monday to discuss the evolution of the Company in more detail. Thank you very much.

Thank you. That does conclude our conference. Thank you all for participating. You may all disconnect.