Euroseas Ltd (ESEA) 2011 Q4 法說會逐字稿

Thank you for standing by, ladies and gentlemen, and welcome to the Euroseas conference call on the fourth-quarter and year-end 2011 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. There will be a presentation followed by a question-and-answer session, (Operator instructions). I must advise you that this conference is being recorded today, Friday, February the 10th, 2012.

Please be reminded that the Company announced their results after the market closed yesterday for the press release that has been publicly distributed. If you have not received the press release, you may log on to the Euroseas website at www.euroseas.gr and navigate to the Investor Relations page, or you can call Capital Link at 212-661-7566, or the Chief Financial Officer of Euroseas, Mr. Tasos Aslidis, and they will be happy to send it to you.

For those of you who want to follow the audio webcast, please log on to your computer to the home page of Euroseas website, as I mentioned, www.euroseas.gr. Once again, the participants of the webcast can download the PDF from the website. Kindly note that the slides are user-controlled.

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'd kindly draw your attention to slide number 2 of the webcast presentation. It has the forward-looking statement, and the same statement was also included in the press release. I kindly suggest that you take a minute to go through the whole statement and read it.

Without taking any more of your time, I would now like to pass the floor to Mr. Aristides Pittas, Chairman and Chief Executive Officer of Euroseas. Please go ahead, Mr. Pittas.

Good morning, and thank you for joining Euroseas for our conference call. Together with me today is Tasos Aslidis, our CFO. The purpose of today's call is to discuss the results for the three-month period and full-year ended December 31, 2011.

Let us turn to slide 3 and first review our 2011 fourth-quarter results. We reported total net revenues of $15.3 million. Net income for the period was $1.1 million or $0.04 earnings per share basic and diluted. Excluding the effect of unrealized gain and realized loss on derivatives and unrealized loss on saving securities, the net income for the period would have remained the same, $1.1 million or $0.04 per share basic and diluted.

Adjusted EBITDA for the fourth quarter of 2011 was $6.2 million. We also declared a quarterly dividend of $0.05 per share for the fourth quarter of 2011, payable on or about March 9, 2012 to shareholders of record on March 2, 2012. This is the 26th consecutive quarterly dividend declared.

For the 12 months of 2011, we report total net revenues of $61.4 million. Net income for the full year was $1.1 million or [$0.04] per share basic and diluted. Excluding the effect of unrealized and realized loss on derivatives, and realized loss of savings securities and amortization of fair value of charges acquired, the net income for the period would have been $1.5 million or $0.05 net income per share basic and diluted. Adjusted EBITDA for the 12 months of 2011 was $21.6 million. We also declared four quarterly dividends for a total of $0.26 per share during full-year 2011.

Please turn to slide 4. In view of the challenging market conditions and our desire to preserve cash to take advantage of new investment opportunities, our Board decided to reduce our quarterly dividend to $0.05 per share, which still represents a healthy annual yield of about 7% on the basis of our stock price of $2.87 on February 8, 2012. This is the 26th consecutive quarterly dividend declared. Our intention moving forward is to maintain a policy of providing healthy dividends throughout market cycles without compromising growth opportunities.

Please turn to slide 5 to look at our operational highlights. In the fourth quarter of 2011, we drydocked one vessel, the Captain Costas. The drydock was booked forward from its initially planned date within 2012 to benefit from the downtime this vessel was facing, due to the difficulty to find employment at this time of the year. We want to note that we have zero scheduled drydockings for the next three quarters, and just one in the fourth quarter of 2012.

On the drydock chartering front, we just extended the charter of M/V Aristides N.P. for 10 to 12 months, with its current charter at $10,300 today. We believe that this picture will provide us with substantial additional secured cash for the next year, as it is expected to generate in excess of $3 million of gross revenues, allowing us more flexibility in pursuing further growth opportunities.

Recently we have also renewed charters of three container ships with generally short durations because of the weakened containership duration over the last few months. The Manolis P was expanded with its current charter at $7,000 a day, the Aggeliki P was chartered at $6,500 a day, and the Marinos at $6,100 a day, but this last picture requires one big ballast to position itself.

Additionally, we have two ships, the Jonathan P. and the Captain Costas, which is still looking for employment. The continued drop in the charter market, which reflects seasonal effect with less activity due to reduced trade growth within Europe and the US, and the effect of the concerted efforts of liner companies to push freight rates up again are the main reasons why charter rates have dropped as much, and finding employment has become much more difficult.

Seasonal activity normally increases during Q2. It remains to be seen if this will be sufficient to reverse the negative trend we have been witnessing the last six months.

On the Euromar front, since our purchase of the TORGE S in October 2011, we have not made any new acquisitions, as we have been following the drop in time charter rates and consequently ship prices as well, waiting to best time our remaining capital investment. Currently, we have [8] geared containerships with an average age of approximately 7.9 years and a total coming capacity of 19,000 TEUs with charters staggered over the next nine months.

Let me remind you that pursuant to the terms of the joint venture of the total $175 million agreed to be invested by Euroseas [in bulk] and drawn capital, $105 million has been committed with another $70 million remaining to be invested. Euroseas has last contributed $15 million out of its agreed $25 million commitment.

Our current fleet is shown on slide 6 and consists of five drybulk vessels, 10 container ships and (inaudible) ships. On the following slide, slide 7, we list the Euromar fleet of [8] modern geared intermediate handysize container ships.

Let us move to slide 9 for just a brief overview of the market. Recent IMF projections [point to 3.3%] and world GDP growth in 2012, a significant decrease from the previous quarter of 4%. The main reason for this decreases stems from the very negative outlook for the year result, but naturally the whole developing world is impacted.

This has led us and other analysts to revise our trade demand estimates downwards, as low GDP projections are strongly correlated with drybulk and container rates. To the extent that future GDP growth is going to be dependent more on developing countries than the developed ones, one may expect that drybulk rates to grow at a slightly faster pace than historically for similar world GDP growth rates.

As you can see in slide 10, during the last decade, China's share of major bulk exports has grown to represent 35% of the total as compared to just 8% in 2001. Because that's replaced the developed world as the prime factor determining bulk demand and [days years of whole] account for about 75% of the total demand today. Naturally, this has led to an increase of the trade growth to GDP multiplier from one times to about 1.5 times.

For containers, we have not seen such a significant change in the pattern of trade during the last 10 years, as trade to Europe and the US still comprises about 50% of the world trade in TEU miles, only marginally down from the 2001 levels. We expect that going forward, developing economies will absorb more of the container trade growth, thus counterbalancing the drop in trade growth of the developed economies, and thus maintaining the trade to GDP multiplier at the current level of between 2 and 2.5.

Let's turn to slide 11. Against this demand background, we have to also look at ships supply. The current delivery schedule for drybulk vessels in 2012 stands at 22.7%. This does not take into account cancellations, slippage and scrapping. It is difficult to quantify how much of the order book finally gets delivered. In all probability, it's going to be less than 7%, due to the poor market and the lack of financing, though the yards will be strongly resisting owners requests as much as possible.

For 2013, the current order book at 6.8% is not high, but we do expect ships that were scheduled to be delivered in 2012 to be rescheduled for 2013, thus keeping deliveries for that year high too. Please note, though, on the left-hand side, that the percentage of the fleet that is older than 20 years is still very high, close to 17%. This will no doubt help the fleet rebalance relatively quickly by being scrapped, if rates remain low for a sufficient period of time.

Let's turn to slide 12. The containership order book for 2012 deliveries is about half that of drybulk in percentage terms and much lower than what has been historically. The significant number of placed orders in 2011 is nearly all for bigger ships and will be delivered in 2013 onwards.

As further significant new orders are not placed, the market should be in the position to absorb them. If this ordering frenzy was to revive, it would put the brake on the prospects for the market a few years down the line. However, this current slowdown in the container charter market will probably result in a significant decrease in new orders, so at least ensuring six to nine months; thus assisting the longer-term prospects of the market.

The delivery schedule for 2012 stands at around 9%. And just as in the supply of drybulk vessels, the larger vessels dominate the order book, while the smaller ships, where we are active, actually lag expected rate growth, though the cascading effect is already being felt by smaller ship owners to a certain extent. Cancellations, slippage, conversions, and scrapping will bring the actual supply growth down. Operational matters such as piracy and slow steaming will also reduce the actual effective fleet growth.

Let's turn to slide 13 to summarize our views on the drybulk market. On the drybulk market, China's revived appetite for cargo provided for the momentum for the capesize segment during the third and fourth quarter 2011, to launch significant increases, more than doubling the previously dismal rates these ships were earning. This turnaround drives all vessel segments to the highest rate levels of 2011.

Since the beginning of the year, though, drybulk rates have quickly declined because of both supply and demand pressures. Far too many deliveries need to be canceled or postponed, and/or drybulk rates to grow at a significantly faster pace than forecasted in order to balance the market. The solution will eventually come through scrapping, which we expect to continue at its current high pace for the next 15 to 18 months, and lead to a more balanced market sometime in 2013.

Let's now turn to slide 14, which summarizes our views of the container market. Currently, the container ship market does not look rosy, as we see trade volumes for this running quarter remaining low due to seasonality in the Eurozone waters. After March 2012, when seasonal volumes go up, we would expect an improvement in charter rates. But how strong that would be is difficult to predict.

With our supply demand analysis producing an overall balanced environment for both 2012 and 2013, slight changes in natural GDP growth will have a significant effect due to the 2 to 2.5 times multiplier historically applicable. As already mentioned, supply growth is mainly in the large-size segments. This is giving rise to the skating effect not only in the East-West rates, but also in the north-south rates, especially for gearless vessels. Nevertheless, the limited supply in the previous sizes we operate, plus the need for gearing in many trades, could provide effective protection from the expected oversupply in the larger sizes.

Let's turn to slide 15 to discuss our drybulk employment situation in more detail. Our drybulk fleet is fully covered for the whole of 2012. We therefore expect to see no influence in our earnings from the developments in this market this year. The decision to charter the M/V Aristides NP served also to slightly increase our employment covers in 2015. Last, for 2013, our coverage is increased to 46%, with ships opening up gradually over time.

Let's turn to slide 17. As far as the container ships are concerned, we currently have 28% coverage for 2012. While employing our vessels on short-term cycles because of the weakened conditions in the market, so we can be able to take advantage of future upswings. We still believe that starting from Q2 2012, we may have some upward potential if the global environment does not deteriorate further and global GDP hovers around 3.5%. We will, therefore, generally be renewing and expanding charters for periods of maximum up to a year, even if that means accepting low levels or having to wait to find employment.

Please turn to slide 18. Through Eurobulk, our manager, we have been able to reduce our daily cost in both 2009 and 2010. The graph on the chart compares our daily costs, excluding only drydocks.

Overall costs are amongst the lowest of the public shipping companies, and we are very proud of this performance, especially at these in conjunction with operational fleet utilization in excess of 98.5% over the last five years -- a level similar to that of our peers, despite the fact that the average age of our fleet is higher than most of the other listed companies. Our 2011 costs are slightly up from last year, but in line with our budget, mainly reflecting dollar weakness, higher price of spares and loops, and increased provision costs.

Let's turn to slide 19. The left side of the slides shows the combination of time charter rates for Panamax drybulk ships and container ships of 1,700 TEUs over the last decades. Earnings for container ships were moving in parallel for earnings for Panamax ships, with the exception of the peak in 2004, which was the prelude of the Super Cycle that was to follow in the drybulk sector in 2006 and 2008.

From 2006 to 2010, drybulk significantly outperformed the containership market, due to the Chinese demand boom. But the two markets finally converged again in July. After the small spike we saw in drybulk rates during the last quarter, the markets seem to be converging again.

The right-hand side of this slide shows currency values in relation to historical prices. Drybulk gas prices corrected quickly to match what is happening on charter rates. We are below historical levels and values, and we think they have a bit further south to go. Containership values have been weakening over the last few months, and are again significantly below historical levels. We believe their direction will depend on what transpires in Q2 2012.

As explained in numerous occasions, we are generally comfortable investing at levels around historical average all over. We are therefore evaluating all opportunities, both directly and via our Euromar joint venture, we'll be able to enhance shareholders value.

With that, I will pass the floor over to our CFO, Tasos Aslidis, to take you through our [Q4] financials in more detail.

Thank you very much, Aristides. Good morning, ladies and German. I will now provide you with a brief overview of our financial results for the three-month period and full-year ended December 31, 2011 in the same level market as we did in previous presentations.

Let's go to slide 21, which shows our fourth-quarter and full-year results in comparison to the same period of 2010. I will repeat here some of the figures that Aristides gave at the beginning of the presentation.

For the fourth quarter of 2011, we reported total net revenues of $15.3 million, representing a 20% increase over total net revenues of $12.8 million during the fourth quarter of 2010. We reported net income for the period of $1.1 million as compared to net losses of $0.9 million for the fourth quarter of the previous year.

Basic and diluted earnings per share for the fourth quarter of 2011 were $0.04 per share compared to basic diluted losses per share of $0.03 for the fourth quarter of 2010. The results of the fourth quarter 2011 include $0.3 million net unrealized gain on derivatives and trading securities, and $0.3 million net realized loss on derivatives, as compared to a $4 million net unrealized gains -- gain on derivative and trading securities, and $1.6 million realized loss on derivatives for the same period of 2010.

Excluding the effect on the earnings for the quarter of the unrealized gain and realized loss on derivatives, the earnings per share for the quarter ended December 31, 2012 would have been also $0.04 per share basic and diluted, compared to losses of $0.12 per share for the quarter ended December 31, 2010.

Adjusted EBITDA for the fourth quarter of 2011 was $6.2 million, representing a more than 500% increase for the $1 million received during the fourth quarter of last year. As Aristides mentioned earlier, we declared a quarterly dividend of $0.05 per share for the fourth quarter of 2011 payable on or about March 9, 2012 to shareholders of record on March the 2nd, 2012. This is the 26th consecutive quarterly dividend declared.

Turning to the 12 months of 2011, we reported total net revenues of $61.4 million, representing a 17% increase over total net revenues of $52.5 million during 2010. We reported net income for the period of $1.1 million compared to a net loss of $6.6 million for 2010.

Basic and diluted income per share for the 12 months of -- in 2011 was $0.04 compared to basic and diluted loss per share of $0.21 for 2010. The results for 2011 include a $0.9 million net unrealized loss on derivatives and trading securities, and a $0.8 million net realized loss on derivatives, as compared to $8.1 million net unrealized gain on derivatives and trading securities, and $12.4 million net realized loss on derivatives for the same period for the full year of 2010.

Excluding again the effect on the end for 2011 of the unrealized and realized loss on derivatives, and realized loss on trading securities, and amortization of fair value of charters acquired, the earnings per share for 2011, which have been $0.05 basic and diluted, compared to losses of $0.14 per share basic and diluted for 2010. Adjusted EBITDA for the 12 months of 2011 was $21.6 million, representing a 49% increase over the $14.4 million of EBITDA achieved during 2010. For the full year, as Aristides mentioned earlier, we declared four quarterly dividends for a total of $0.26 per share.

Let's now move to slide 22. This slide shows our fleet performance for the three-month period and full year ended December 31 of 2011, and compares it to the same numbers for 2010. We have broken down our fleet utilization rate into commercial and operational; thus, during the fourth quarter of this year, we've reported a 90.5% commercial utilization rate and a 99.6% operational utilization rate, compared to 99.7% commercial and 99.9% operational for the same period in 2010. The utilization rate does not include vessels in lay-up or scheduled repairs during the reported periods.

The fourth quarter of 2010, in the fourth quarter, we operated enough -- exactly 16 ships, earning a time charter equivalent rate of about $12,100 investment per day, an increase of about $2,000 per day, and compared to the time charter equivalent rate we had in the same period of last year.

Again in the fourth quarter of 2011, our 16 vessels set operating expenses operating about $5,766 per vessel per day, compared to $5,774 per vessel per day for the same quarter in 2010. Total daily operating expenses, including management fees, general administration expenses, but excluding [those, of course,] registered a decrease of about half-a-percent during the fourth quarter of 2011 compared to the same quarter of last year.

Drydocking expenses expressed on a per vessel per day basis were significantly lower -- almost 90% lower for the fourth quarter of 2011 as compared to the same period in 2010, primarily because fewer of our vessels were drydocked during the last quarter of this year. As always, we want to emphasize that cost control remains a key component of our operating strategy.

I would like to turn your attention to the bottom of this table to our daily cash flow breakeven level for the quarter, expressed on a dollar per day per vessel basis. We reported in the fourth quarter of 2011 a daily cash flow operating breakeven level, which includes low on repayments of approximately $8,729 per vessel per day, compared to approximately $9,843 per vessel per day for the same period in 2010.

Let's now move to the right side of slide 22, where we have the full year numbers. For the full year of 2011, we reported a 96.8% commercial utilization rate, and a 99.7% operational, compared to 99.9% commercial and 99.3% operational for the same period -- for 2010. Again, this utilization rate did not include vessels lay-up or scheduled repairs during the two years. For the full year of 2011, we operated 16 ships, earning a time charter equivalent rate of $11,525 per vessel per day, again an increase compared to the time charter rate we achieved during 2010.

Our 16 vessels during 2011 had operating expenses on average of about $6,000 per vessel per day, compared to $5,191 per vessel per day for 2010. Once again, I want to add the total operating expenses on a daily basis include management fees and G&A expenses, but exclude drydock, of course. And those register an increase of about 15.5% for 2011 compared to 2010.

These increases are partly due to the fact that in the first nine months of 2010, we had two laid-up vessels out of a total of about 15.5 for the year. And those laid-up vessels include much lower daily earning expenses and management fees, resulting in a low average for the year. Drydocking expenses expressed on a per vessel per day base again were lower by more than 50% in 2011, as compared to the same period -- as compared to 2010; again, because fewer of our vessels were drydocked last year.

We reported for the full-year 2011 a daily cash flow operating breakeven level, which again, includes loan repayments of approximately $9,222 per vessel per day, compared to approximately $8,660 per vessel per day for the same -- for 2010.

And with that, let's move to slide 23. This slide shows the expectation of our cash flow breakeven over the next 12 months on the right side, and also on the left side shows our scheduled debt repayments. As you can see on the chart from the information on the left side, in 2012 -- in 2011, we had a relatively low level of debt repayments, and the same level of debt repayments we can see from the chart that we're going to have in 2012.

Next year, we're scheduled to make total repayments, including some balloon repayments of about $13.4 million, which results in about $2,300 per vessel per day contribution to our cash flow breakeven level, which you can see now on the right side of the slides.

After making appropriate assumptions for the other elements of our cash flow breakeven level, like operating costs, G&A expense, et cetera, you can see that for the next 12 months, we expect to have about $9,500 per vessel per day and operational breakeven level on a full year operational basis, for all of our vessels operating. I would like to remind you again that these figures do not give guidance to any [interim] items we might have over the next 12 months, which will reduce the breakeven level further.

I would like to conclude my remarks by proceeding to the next slide, slide 24, and giving you some highlights from our balance sheet. As of December 31, 2011, we had unrestricted cash of about $31 million and restricted cash of approximately $6 million. Our debt, including the current portion of it, was about $74.9 million, resulting in a debt to capitalization ratio of about 26%. As a result of the relatively low debt burden, we have -- we are in full compliance with our covenants as of the end of last year.

We estimate that we can allocate $25 million to $30 million of our cash for further expansion, for which after allowing for the remaining $10 million commitment to our Euromar joint venture, we will be able to designate $15 million to $20 million for our additional investments over and above the Euromar contribution, which again translates to us being able to acquire, depending on the size, type and age, one to two additional ships (inaudible) even more.

And with that, I would like to pass the floor back to our CEO, Aristides Pittas. Aristides?

Yes, hello. Thank you, Tasos. Let me take this opportunity to open the floor up for any questions.

(Operator instructions) Justin Yagerman, Deutsche Bank.

This is Josh Katzeff for Justin. (multiple speakers) I just kind of wanted to start off maybe with the dividend. I guess the Board decreased it down to $0.05. How comfortable are you at this level? Or is the Board at this level? And if container rates kind of maybe stay at or maybe a little bit higher than current levels for the rest of the year, is that dividend still at risk?

I don't think that the dividend is something that is at risk. Our policy has always been to give a dividend which translates to a dividend yield of between 5% and 12%, let's say. For this is the case for all 26 quarters that we've paid out the dividend.

So it's a function of our share price. We feel that we are rewarding ourselves on this well, if we are giving dividends out over this range. And now that we think we will see some investment opportunities, we don't want to overdo it, because we have better use. But we don't want to go down and not be able to give a reasonable healthy dividend to our shareholders. And I don't think that that will happen going forward, looking at things from today.

Got it. Got it. And I guess with regard to deploying capital, just maybe going through the presentation and your commentary, is it safe to say that there might be more of a shift towards container purchases? I mean, I guess in last call, it seemed to be a bit more focused on drybulk. And also maybe if you could give us an update on maybe acquisition timing? Are you out there currently looking at opportunities in the market?

Yes. We are looking at opportunities in both the container market and in drybulk market. We've been inspecting ships and offering on ships. But right now, the asking prices of the sellers and what the buyers want or seem to want are quite far away. That's why you're not seeing too many transactions happening.

We think that the market is moving the way we would like it to move in order to buy ships. So we are insisting on the price levels that we feel comfortable with, and I think that we will get there soon.

Can you provide any more maybe color on where you are comfortable? Is that maybe 10% or 20% below current levels?

No, I think we're not talking about 20% below current levels. And current levels is also down, which is difficult to define in these days. But I would say 10%. We're not that far away from the time that we will do something, either in the Euromar level, which is mostly concentrating on containers, or in the Euromar level, which -- or in the Euroseas, which is open to both opportunities.

Got it. And with regards to the Jonathan P. and Captain Costas, is this a matter of there are no charters out there? Or the charters being offered are at rates that you aren't willing to accept? And maybe if you could add some color on whether there's any age discrimination going on.

I wouldn't call it an age discrimination, but I would call it a commercial description of the ship and the abilities of the ship. That is what really is important. The charter doesn't care if a ship is built in 1990 or 2000, and it has exactly the same specifications. But obviously, elder ships are slightly less efficient than the younger ones are, and this takes its toll.

So, yes, charters are preferring to get younger ships with slightly better assumptions or more refrigerated capacity or things like that, rather than these two ships, for example, that we have, because the charter rates are already so low that it doesn't play a big difference. There are not that many charters around willing to take ships at this point. It has been very quiet during the Christmas holidays up to the Chinese New Year.

We're seeing a little bit more activity nowadays. Just the last two or three weeks, we've chartered three of our ships. We also have our Tiger Bridge on [subs] to be extended with the current charter. So there is more movement. We would hope and think that we will see interest for the Jonathan P. and the Captain Costas in the next few weeks. But there is not a lot of interest around overall.

Got it. Well, I appreciate the color. Thanks, guys.

James Woods, FBR Capital Markets.

Thank you for taking my call. (multiple speakers). Sort of from a high level, I'm interested in getting your perspective on the impact of the recent, I guess, alliances on the liner level. What impact do you guys have -- or see that having on the container ship market and chartering? Have you noticed a change in behavior from the liner side?

We haven't really noticed that change in behavior in our own business, because we are more involved in the smaller ship size, where we don't see that effect as much. That is something which is happening more on the main trades, where these alliances are being formed. So, we haven't really seen something there.

Okay. But you don't -- you're not necessarily expecting that to result in any sort of additional discipline or rationalization of market supply growth?

We would hope so. As long as all the liner companies are facing difficulties due to the very low freight rates, which they are now trying to increase with these alliances. But as long as these companies are not doing that well, we will not see them placing orders for new vessels, which obviously is a good thing.

Right. This actually lends a little bit to my next question, which is, when you talk about -- and you talked about this a good bit on the call already, but -- when you think about the cascading effect that's going on, you know, larger vessels moving down market, where do you think that stops? And does that -- to what extent does that impact your outlook on making acquisitions in the containership market?

I think it really doesn't stop anywhere, to be honest. It stops to the -- at the extreme it stops at the smaller vessels, which are not needed any more; ships under 1,000 TEU, which are replaced by 500 TEUs and more than that, and blah blah going up to the big ships.

So, one thing I wouldn't feel comfortable is with the ships you know substantially smaller than 1,000 TEU. There is another point to where there is some difficulty in seeing the cascade, which is between, let's say, [3500] and 5,000 TEU ships, because the big ships, [4200], [4500], 5000, can not really easily cascade into trades where you have [2,500], 2800 and things like that. So, that's not going to be so easy to have such a smooth cascade in effect as we see in the much bigger ships, or even in the smaller ships between 1000 and 3000.

So you're saying that (multiple speakers) --

(multiple speakers) -- that gearing might provide a barrier you want to reduce the cascading down to the feeder levels. So there is -- for the feeder ship sector that we are active, there are two things you may say. One, the feeders are becoming larger, because economies of scale always are shorter. At the same time, the gearing gives some protection from the cascading. So we see the [2000, 1500] to 3000 range as being the one being somewhat protected from the cascading and benefiting from the moving upwards of the feeder trades.

Okay, so you actually think that sort of small to mid-size market is insulated from the downward cascade? And (multiple speakers) it still benefit --

Well, it's somewhat protected. I mean, they're obviously gearless trades the gearless ships can be used. And there you might see some cascading. But there are trades with gear ships are needed, and there it's hard for detailed gearless ships to invade.

And that's exclusively because of gears and maybe also just the logistics of putting a larger ship on a shorter haul?

It's both. Yes, it's both. The gear is one important factor, but also the size of some ships and the logistics on the amount of cargo that needs to be carried is another. But the correct word was not as you said insulated, but as Tasos said, somehow protected.

Okay. Okay, that's really helpful, guys. I really appreciate it. And I guess on that, I'm going to turn it back. Thank you for your time.

Thanks. Nice talking to you.

And you.

Michael Webber, Wells Fargo.

I just wanted to jump back onto one of Josh's questions on lay-up. And you kind of touched on this already. But you've got a handful of vessels that are coming due off of the shorter charters you just signed. I mean, what do those as limited prospects look like? I know this is hard to gauge, but I mean, how many more vessels do you think you guys could end up putting on lay-up before the end of the second quarter?

We haven't put in lay-up yet the two ships. They're in cold lay-up, the two ships that are waiting for all of this, let's say, waiting to find employment. The ships are ready to leave as soon as we find some charter.

I believe that Q2 will be better than Q1 as it historically is, and we will not need to lay-up any of our ships. I'm hopeful that we will be able to do something with the Jonathan P. and the Captain Costas as well, within the next few weeks. If the market turns out to be much worse than what we anticipate, then obviously, we will consider the option of putting in cold lay-up. But we will discuss that if the market doesn't improve within the next month or so.

Got you. Actually my next question was, are you going to remember back to '09 when there was a pretty big difference between hot lay-up and cold lay-up. I mean, are you seeing -- I know you guys might not be doing it, but are you seeing any other owners, any one, any other competitors cold-stacking their vessels, cold laying them up?

We're not seeing too much of that, no, I have to say. I mean, probably some people have done it but I don't know who. Most of the ships that are currently idle are either ships that are definitely too old. Our ships are 20 years old, but there are ships around that are 27, 28 years old, which probably will never start working again.

But I haven't really seen people putting ships in cold lay-up yet. I think probably most people think the way we do, that things will be better in the next couple of months.

Got you. All right. No, that makes sense. On one vessel in particular -- and forgive me if you mentioned this earlier -- but the Tasman Trader, the multipurpose vessel, you guys have had on pretty long-term charter for a while. What's the market for that asset like specifically? That comes dues at the end of the first quarter. And forgive me if you guys have already said what you're going to do with it.

No, we haven't, but we are very close to finalizing the renewal of that charter with the present charters at a slightly lower level than where we are trading today, but higher than what our other containerships are seeing in the market today. But we are in the process, so nothing to really report right now. We are hopeful.

Okay. And then talking of switch cargoes, that's going to stay where it is?

It's going to stay where it is. If we agree with these people, it's going to stay where it is, yes.

Okay. All right. That's helpful. I guess switching to your JV -- and again, forgive me; I hopped on the call late, if you mentioned this already, but -- have you guys determined what you're going to do with the extension? I believe it comes up, the extension for your JV with Euromar or with Rhone Capital and Eton Park, I think it comes up in March?

Yes, you're absolutely right. And we have agreed to extend the period for the containerships for a further year, and we'll take it from there. The cooperation with both of these firms has been excellent. We're very happy with it and I think they are happy with us as well. So, this can be something that continues for quite sometime, hopefully.

Okay. No, that's helpful. And I guess just finally, and you guys already kind of touched on this a little bit -- but in terms of when you guys are out in the market looking at assets, and you've gotten younger on the dry side, where in the age spectrum are you really looking right now? Where are you seeing the biggest value in terms of what you guys are bidding on?

Yes. Ships are being built 2000 to 2005 or something like that. This is the main range, but you can go a bit younger or a bit older. We've always felt comfortable with ships that are around 10 years of age, because they have enough life to go through good markets and are cheaper than newbuilds. Yes.

Okay. I guess, how low would the back-end of that asset curve need to go before you guys would think about kind of reverting back to your original strategy, and kind of buying up the older tonnage, so you can really generate a significantly better than market return?

I mean, we buy all those ships when the market is very high, because they maintain a good part of the earning capacity of the younger ships. When the market is low, I think it makes sense to buy the younger ones because they're comparatively cheaper and better investments.

Okay. All right, that's fair. I think that's all I have. I appreciate the time, guys.

Thank you, Mike.

(Operator Instructions) There are no further questions at this time. Please continue.

Okay, guys. Thank you for being here today for our scheduled conference call. We will be back with you in three months' time. Thanks.

Thank you, everybody.

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