Press Releases
Cove Apparel, Inc. announces business combination with Euroseas Ltd.
San Clemente, California, September 29, 2005 ? Cove Apparel, Inc. (OTCBB: CVAP.OB) announced today that on August 25, 2005 it signed an Agreement and Plan of Merger (the "Merger Agreement") with Euroseas Acquisition Company Inc., a Delaware corporation and wholly owned subsidiary of Euroseas Ltd., a Marshall Islands corporation. In connection with the merger, Euroseas also completed a $21 million private placement to expand its fleet by acquiring additional vessels. The Merger Agreement provides for the merger of Cove into the Euroseas subsidiary, with Cove shareholders receiving 0.102969 shares of Euroseas common stock for each share of Cove common stock owned.
Details on the parties and merger follow.
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. Euroseas Ltd., through its wholly-owned subsidiaries, owns and operates seven drybulk vessels, including four Handysize bulk carriers, two Handysize containerships, and one Panamax drybulk carrier. Euroseas operations have been profitable, with 2004 Revenues of $45.7 million, Operating Income of $31.1 million, and EBITDA of $34.6 million. Euroseas will continue to operate in the drybulk and container shipping markets, with operations managed by Eurobulk Ltd., an affiliated ship management company. Eurobulk will be responsible for the day-to-day commercial and technical management and operations of the vessels. Eurobulk Ltd. is an ISO 9002:2000 certified ship management company and represents four generations of ship management tradition and expertise in the Pittas family dating back to the late 19th century.
Euroseas' five drybulk carrier vessels have total cargo capacity of 190,904 deadweight tons (dwt) and its containerships have cargo capacity of 2,538 twenty-foot equivalent units (teu). Euroseas employs its vessels in the time charter market and through pool arrangements for greater visibility and earnings predictability. Presently, six of its vessels are employed under time charters, and one vessel is employed in the Baumarine pool that is managed by Klaveness, a major global charterer in the dry bulk area. Euroseas currently has about 80% of its 2005 operating days fixed on time charters, and about 45% of its 2006 operating days are already fixed on time charters and pool employment as well.
The Drybulk & Containership Industries. Drybulk carriers are employed for seaborne transportation of key commodities and raw materials such as iron and steel, grain, fertilizers, minerals, forest/agricultural products, ores, bauxite, alumina, cement and finished goods transported in bulk. Containerships provide transportation services for the containerized trade of, primarily, finished goods, but also, an increasing number of other cargoes. Containerized trade has been one of the fastest growing sectors of seaborne trade. In recent years, the demand for raw materials by developing countries (China, Southeast Asia and India) has led to strong growth in the drybulk shipping market and capacity constraints have generated increased vessel chartering rates. Demand for iron ore (steel production) and Coal (heating and power generation) have been growing rapidly as China, Asia and India build infrastructure and meet the demands of their newly industrialized base and population. Additionally, the outsourcing of manufacturing in the Far East, and especially China, for technology and consumer products has driven significant growth in the container shipping area as finished goods are moved back to OEMs and consumers.
Management. Euroseas is managed by Aristides J. Pittas, its Chairman and CEO. Mr. Pittas has 20 years of experience in senior roles within the shipping industry and was formerly Managing Director and Chairman of Eurobulk, and will remain as its Chairman. Anastasios (Tasos) Aslidis, Ph D, will become Chief Financial Officer of Euroseas, and has over 17 years of experience in the shipping industry and was most recently a partner with Marsoft, an international consulting firm focusing on investment and risk management in the maritime industry. Management of Eurobulk will consist of seasoned persons that have over 100 years combined experience in the shipping business and vessel management. Euroseas will also have a Board of Directors which will be comprised of individuals with senior experience in shipping and related business areas.
Euroseas Dividend Policy. Euroseas plans to distribute, on a quarterly basis, substantially all available cash flow generated by operations less expenses, debt service, reserves for drydocking expenses, special surveys, and after establishing necessary working capital reserves. Necessary working capital reserves will be determined by the business needs, terms of existing credit facilities, growth strategies, and other cash needs as determined by the Board of Directors, or required by prevailing law.
Select Financial Information on Euroseas. Selected financial information for Euroseas for the years 2002-2004 is as follows:
| ? | Years
Ended December 31 (audited) |
Six
Months Ended June 30 (unaudited) |
|||
| ? | 2002
|
2003
|
2004
|
2004
|
2005 |
| Gross revenue | $15,291,761
|
$25,951,023
|
$45,718,006
|
$21,321,769
|
$23,833,736 |
| Operating income | 1,651,856
|
9,351,608
|
31,107,759
|
15,182,539
|
15,301,112 |
| Net income | 891,628
|
8,426,612
|
30,611,765
|
14,910,424
|
14,763,374 |
| EBITDA | 5,738,409
|
13,941,418
|
34,594,658
|
16,830,370
|
17,043,717
|
Financing and Shareholders. On August 25, 2005 Euroseas completed a private placement of common stock and warrants to raise approximately $21 million gross, selling 7,026,993 shares at $3.00 per share. Euroseas expects to use the net proceeds to acquire additional vessels. Euroseas? vessel acquisitions will focus on secondhand vessels that are Panamax, Handymax and Handysize bulkers and feeder containerships. After giving effect to the merger and private placement, the original shareholders of Euroseas will own 78.6%, or 29,754,166 shares, Cove shareholders will own 2.85%, or 1,079,166 shares, and new investors will own 18.55%, or 7,026,993 shares. Eurobulk Marine Holdings, Inc. which is owned by the Pittas family, also invested $3 million in the financing. Investors also received warrants to acquire 1,756,743 shares of common stock at $3.60 per share for a 5 year period. Post financing and upon effectiveness of the agreements, Euroseas will have a total of 37,860,326 shares outstanding. Upon effectiveness of the merger the shares of Cove will be exchanged for Euroseas shares on a ratio of 1 Euroseas share for every 9.71 shares of Cove.
The merger is subject to standard conditions, including approval by Cove stockholders and effectiveness of the merger registration statement. There can be no assurance that the proposed merger will be consummated. This announcement does not constitute an offer to sell securities nor the solicitation of an offer to purchase the securities. The private placement has been closed and no additional investors will be admitted in the private placement. For more detailed information regarding the transaction see the disclosures set forth in Cove's Report on Form 8K, dated August 31, 2005, and Amendment to Report on Form 8K dated September 28, 2005, a copy of which may be accessed at www.sec.gov
Cove Apparel, Inc. Cove Apparel, Inc. is a surf apparel company specializing in casual apparel and accessories for men, women and juniors. Cove?s stock is listed on the Over the Counter Bulletin Board under the symbol CVAP.OB.
SAFE HARBOR STATEMENT
This press release contains statements that are forward looking as that term is defined by the United States Private Securities Litigation Reform Act of 1995. These statements are based on current expectations that are subject to risks and uncertainties. Actual results may differ due to factors such as material adverse events affecting either company or the ability of either company to satisfy the conditions to completion of the business combination. Readers are referred to Cove Apparel?s most recent periodic and other reports filed with the Securities and Exchange Commission.
EBITDA, which is not a recognized measure under accounting principles generally accepted in the United States of America (?US GAAP?), represents income before interest expense, income taxes, depreciation and amortization (including amortization of drydock expenses). We have been advised by Euroseas that it believes EBITDA is useful in evaluating the performance of shipping companies because it eliminates the effects of financing and income taxes and the accounting effects of capital spending and acquisitions, which items may vary for different companies for reasons unrelated to overall operating performance. When analyzing Euroseas? operating performance, interested parties should use EBITDA in addition to, and not as an alternative for, its net income (loss) as determined in accordance with US GAAP. Because not all companies use identical calculations, Euroseas presentation of EBITDA may not be comparable to similarly titled measures presented by other companies.
A reconciliation of Euroseas net income to its EBITDA is included below:
Years
Ended December 31 (audited) |
Six
Months EndedJune 30 (unaudited) |
||||
| ? | 2002
|
2003 |
2004
|
2004
|
2005 |
| Net income (loss) | $891,628
|
$8,426,612
|
$30,611,765 |
$14,910,424
|
$14,763,374 |
| Income tax | ---
|
---
|
---
|
---
|
--- |
| Interest and finance cost | 799,970
|
793,257
|
708,284
|
297,916
|
545,719 |
| Interest income | (6,238)
|
(36,384)
|
(187,069)
|
(18,535)
|
(89,698
) |
| Amortization and Depreciation | 4,053,049
|
4,757,933
|
3,461,678
|
1,640,565
|
1,824,322 |
| EBITDA | $5,738,409
|
$13,941,418
|
$34,594,658
|
$16,830,370
|
$17,043,717 |
Mr. Leib Orlanski, Esq. of the Los Angeles office of the law firm Kirkpatrick & Lockhart Nicholson Graham LLP, acted as special counsel to Cove Apparel, Inc., in this transaction
For further information:
COVE APPAREL, INC.
Mr. Leib Orlanski, Esq.
Kirpatrick & Lockhart
(310) 552 5044