Euroseas Reports Results for Q1

Press Release May 20, 2011

Euroseas Ltd. (NASDAQ: ESEA), an owner and operator of drybulk and container carrier vessels and provider of seaborne transportation for drybulk and containerized cargoes, announced today its results for the three month period ended March 31, 2011.

First Quarter 2011 Highlights:

-Net loss of $0.6 million or $0.02 loss per share basic and diluted on total net revenues of $14.2 million. Excluding the effect of unrealized gain and realized losses on derivatives, unrealized loss on trading securities and amortization of the fair value of charters acquired, the loss for the period would have been $1.3 million, or $0.04 loss per share.

-Adjusted EBITDA was $3.7 million. Please refer to a subsequent section of the Press Release for a reconciliation of adjusted EBITDA to net loss.

-An average of 16 vessels were owned and operated during the first quarter of 2011 earning an average time charter equivalent rate of $11,088 per day.

-Declared a quarterly dividend of $0.07 per share for the first quarter of 2011 payable on June 10, 2011 to shareholders of record on June 1, 2011. This is the twenty-third consecutive quarterly dividend declared.

Aristides Pittas, Chairman and CEO of Euroseas commented: "During the first quarter of 2011, we continued executing our strategy of positioning Euroseas to benefit from the market trends.

"Our cautious approach towards the drybulk markets that led to fully cover our drybulk fleet with charters that run well into 2012 appears to have been justified from the market weakness during the first quarter. On the other hand, our containership fleet has started and is expected to continue benefitting from the increasing containership charter rates as the charters of four of our eleven vessels have been already renewed at levels on average about 69% higher than their previous charters and eight more renewals, including two of the previous four vessels, are expected to be renewed during the rest of 2011. As we believe that the containership market will continue strengthening into 2012, our renewal strategy is to pursue charters with average duration of not more than a year. Our Euromar joint venture also contributed to our results with the charters of two of its six containerships renewed at higher levels.

"In parallel to our employment strategy, we continue focusing on identifying accretive vessel investment opportunities. We believe that stronger rates in the containership sector in the near term support higher values for the vessels without reducing investment returns. As we mentioned before, we expect a volatile environment in the drybulk sector as healthy trade demand will be challenged to absorb the expected vessel deliveries. This, in turn, might present us with attractive opportunities for investment.

"In view of the above developments and employment prospects, our Board decided to increase our quarterly dividend to $0.07 per share which represents a yield of about 6.1% on the basis of our stock price on May 18, 2011."

Tasos Aslidis, Chief Financial Officer of Euroseas commented: "The results of the first quarter of 2011 reflect the lower level of the charter markets compared to the same quarter of last year and the higher number of vessels we operated. Also, our results were positively influenced by gains on our interest rate and FFA derivative contracts.

Total daily vessel operating expenses, including management fees and general and administration expenses, during the first quarter of 2011 reflect a increase of about 12.1% on a per vessel per day basis compared to the first quarter of 2010. This increase mainly reflects that two of our vessels that were laid-up during the first quarter of 2010 were operating during the first quarter of 2011, thus, incurring higher daily costs; also, the weakness of the US dollar compared to the same period of last year increased certain of our expenses. 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.

As of March 31, 2011, our outstanding debt was about $85.6 million versus restricted and unrestricted cash of about $40 million. We were comfortably in compliance with all our loan covenants."

First Quarter 2011 Results:
For the first quarter of 2011, the Company reported total net revenues of $14.2 million representing a 3.2% increase over total net revenues of $13.8 million during the first quarter of 2010. The Company reported losses for the period of $0.6 million as compared to net loss of $3.0 million for the first quarter of 2010. The results for the first quarter of 2011 include a $0.5 million net unrealized gain on derivatives and trading securities as compared to $0.7 million net unrealized gain on derivatives and trading securities for the same period of 2010; and, a $0.2 million realized loss on derivatives versus a $4.7 million realized loss in the same period of 2010. Drydocking expenses of $1.5 million during the quarter were higher than the $1.0 million incurred in the first quarter of 2010. Depreciation expense for the first quarter of 2011 was $4.6 million compared to $4.4 million during the same period of 2010. On average, 16 vessels were owned and operated during the first quarter of 2011 earning an average time charter equivalent rate of $11,088 per day compared to 15 vessels in the same period of 2010 earning on average $12,404 per day.

Adjusted EBITDA for the first quarter of 2011 was $3.7 million, a 25.4% decrease from $5.0 million achieved during the first quarter of 2010. Please see below for Adjusted EBITDA reconciliation to net loss and cash flow provided by operating activities.

Basic and diluted loss per share for the first quarter of 2011 was $0.02, calculated on 31,002,211 weighted average number of shares outstanding compared to basic and diluted loss per share of $0.10 for the first quarter of 2010, calculated on 30,849,711 weighted average number of shares outstanding.

Excluding the effect on the earnings for the quarter of the unrealized gain and realized losses on derivatives, unrealized loss on trading securities and amortization of the fair value of time charter contracts acquired, the loss per share for the quarter ended March 31, 2011 would have been $0.04 per share basic and diluted, compared to the earnings, for the quarter ended March 31, 2010 of $0.01 per share basic and diluted. Usually, security analysts do not include the above items in their published estimates of earnings per share.