updated 11/11/2010 9:16:42 AM ET 2010-11-11T14:16:42

PIRAEUS, Greece, Nov. 11, 2010 (GLOBE NEWSWIRE) -- FreeSeas Inc. (Nasdaq:FREE) (Nasdaq:FREEZ) ("FreeSeas" or the "Company"), a transporter of dry-bulk cargoes through the ownership and operation of a fleet of Handysize and Handymax vessels, announced today financial results for its third quarter and nine-month period ended September 30, 2010.

Third Quarter 2010 Highlights

  • Reported adjusted net income of $0.6 million, or $0.10 basic and diluted earnings per share. Including various non-recurring items, the Company reported a net loss of $9.5 million or $1.51 basic and diluted loss per share. A table reconciling adjusted net income to net income can be found in footnote (1) to this release. All per-share amounts have been adjusted to reflect the Company's 1-for-5 reverse stock split effective October 1, 2010.
  • Entered into shipbuilding contracts with a quality Chinese shipyard for the construction of two Handysize dry bulk vessels of approximately 33,600 dwt each for an aggregate purchase price of approximately $48.8 million. The vessels are scheduled for delivery in the second and third quarters of 2012.
  • The Company entered into a commitment letter for pre-delivery and post-delivery debt financing up to an amount of $32.4 million from a leading international bank for the financing of the two newbuilding orders.
  • Classified the M/V Free Hero, a 1995-built 24,318 dwt Handysize dry bulk vessel, as held for sale as the Company intends to sell it. As a result, posted a non-cash vessel impairment loss of $9.6 million.
  • M/V Free Destiny, a 1982-built 25,240 dwt Handysize dry bulk vessel was delivered to its new owners and the Company posted a gain on sale of $0.8 million.

Comments from Management

Mr. Ion Varouxakis, Chairman and CEO, stated, "During the third quarter, we proceeded with the renewal of our fleet by selling the M/V Free Destiny, our oldest vessel, and placing two newbuilding orders at a reputable Chinese shipyard with deliveries expected during 2012. Moving forward, we intend to reshuffle our fleet to release equity, which will be applied to our fleet renewal program. The successful arrangement of pre- and post-delivery financing for our newbuilding orders at favorable financing terms is a testament of our strong relationship with leading financial institutions. We continue to be optimistic about the outlook of the Handysize/Handymax segment reflecting the continuous slippage and cancellation of newbuilding orders, consistent scrapping activity and increasing demand from destinations such as Africa and the Americas. This will result in increased ton-mile transportation requirements from ports with low infrastructure favoring versatile Handy vessels. We believe that we are well positioned to renew our fleet by leveraging on our balance sheet."

Mr. Alexandros Mylonas, CFO, added, "During the third quarter of 2010, our results have been affected by a number of non–recurring items which have resulted in a net loss. Excluding these items, our operational performance is consistent with the results posted in the third quarter of 2009 and in line with our expectations. The Company has continued generating cash through favorable chartering arrangements and close monitoring of our cost base. Our balance sheet has continued improving by further deleveraging of the balance sheet achieved through debt repayment and fleet renewal. Our net debt has been reduced from $128.4 million at December 31, 2009 to $113.1 million at September 30, 2010, translating into a net debt over total assets ratio of approximately 41%, which we deem to be favorable."

 Third Quarter 2010 Financial Review

  • Operating revenues for the third quarter of 2010 were $13.8 million, as compared to $13.1 million reported during the same period of the prior year. The increase is due to higher rates earned during the period along with higher number of operating days driven by the addition of the M/V Free Neptune, which was counterbalanced by the sale of M/V Free Destiny.  
  • Vessel operating expenses for the third quarter of 2010 were $4.6 million as compared to $4.9 million for the same period of the prior year, and $5.3 million sequentially from the second quarter of 2010.
  • Net loss for the third quarter of 2010 of $9.5 million, or $1.51 diluted loss per share based on 6.3 million basic and diluted weighted average number of shares, as compared to net income of $0.5 million, or $0.08 basic and diluted earnings per share based on 5.6 million basic and diluted weighted average number of shares, for the third quarter of 2009. The decrease in shares outstanding is the result of the Company's reverse stock split effective October 1, 2010. The split consolidated five shares of common stock into one share of common stock at a par value of $.001 per share. As a result of the reverse stock split, the number of outstanding common shares was reduced from 32,437,480 to 6,487,852, excluding outstanding and unexercised share options and warrants.
  • Adjusted net income, which excludes (1) vessel impairment loss, (2) provision and write-offs of insurance claims and bad debts, (3) gain on sale of vessel, (4) stock-based compensation and (5) unrealized swap losses, for the third quarter of 2010 was $0.6 million, or $0.10 diluted earnings per share, as compared to $0.56 million, or $0.10 diluted earnings per share, for the third quarter of 2009. A table reconciling adjusted net income to net income can be found in footnote (1) to this release. 
  • Adjusted EBITDA for the quarter ended September 30, 2010 was $6.0 million compared to $5.9 million in the prior year's quarter. A table reconciling adjusted EBITDA to net income can be found in footnote (2) to this release.

2010 Nine-Month Financial Review

  • Operating revenues for the first nine months of 2010 were $45.9 million, an increase of about 7% from $43.0 million in the comparable period of the prior year, largely due to higher rates earned during the period along with higher number of operating days driven by the addition of the M/V Free Neptune, which was counterbalanced by the sale of M/V Free Destiny.
  • Vessel operating expenses totaled $14.7 million for the first nine months of 2010, as compared to $12.3 million for the comparable period of the prior year. The increase is attributable to the higher number of ownership days, higher operating expenses incurred during vessels' dry-docks (four dry-docks in 2010 versus one dry-dock in 2009) and the vigorous cost-cutting initiatives taken in 2009 as a response to the deteriorating market conditions prevailing at the time.
  • Net loss for the first nine months of 2010 of $4.8 million, or $0.76 diluted losses per share based on 6.3 million basic and diluted weighted average number of shares outstanding, as compared to net income of $7.2 million, or $1.53 diluted earnings per share based on 4.7 million diluted shares outstanding, for the first nine months of 2009. All per-share amounts have been adjusted to reflect the Company's 1-for-5 reverse stock split effective October 1, 2010.
  • Adjusted net income for the first nine months of 2010 was $5.7 million, or $0.90 diluted earnings per share, as compared to $7.0 million, or $1.48 diluted earnings per share, for the first nine months of 2009. A table reconciling adjusted net income to net income can be found in footnote (1) to this release. 
  • Adjusted EBITDA for the first nine months of 2010 was $21.9 million, compared to $24.7 million in the prior year period. A table reconciling adjusted EBITDA to net income can be found in footnote (2) to this release.

Balance Sheet and Debt Repayment Information

As of September 30, 2010, FreeSeas' cash and cash equivalents and restricted cash were $13.3 million and stockholders' equity was $140.1 million, compared to $9.6 million and $144.5 million, respectively, at December 31, 2009. The Company's principal repayments total $15.4 million remaining for 2010 (including the $2.7 million prepayment due as a result of the sale of M/V Free Destiny and $9.4 million assumed prepayment from the possible sale of the M/V Free Hero) and $13.9 million for 2011. The following table describes FreeSeas' annual debt repayment obligations for 2010 through 2016:

Fleet Employment (as of November 10, 2010)

Conference Call with Accompanying Slide Presentation

The Company will discuss these results in a conference call later this morning at 11:00 a.m. ET.

The dial-in numbers are:

(866) 861-6730 (U.S.)

(702) 696-4678 (INTERNATIONAL)

The conference call will also be broadcast live via the "Investor Relations" section of FreeSeas's website at www.freeseas.gr or interested parties can click on the following link: http://investor.shareholder.com/media/eventdetail.cfm?eventid=87635&CompanyID=FREE&e=1&mediaKey=EB9ADB8E14D55FD69646AF90B449183D

The Company will also have an accompanying slide presentation available approximately 30 minutes prior to the conference call. The webcast will be archived and accessible for approximately 15 days if you are unable to listen to the live call. To listen to the live call, please go to the website at least 15 minutes early to register, download and install any necessary audio software. If you are unable to participate in the live call, the conference call will be archived and can be accessed for approximately 30 days.

About FreeSeas Inc.

FreeSeas Inc. is a Marshall Islands corporation with principal offices in Piraeus, Greece. FreeSeas is engaged in the transportation of drybulk cargoes through the ownership and operation of drybulk carriers. Currently, it has a fleet of seven Handysize vessels and two Handymax vessels. FreeSeas' common stock and warrants trade on the NASDAQ Global Market under the symbols FREE and FREEZ, respectively. Risks and uncertainties are described in reports filed by FreeSeas Inc. with the U.S. Securities and Exchange Commission, which can be obtained free of charge on the SEC's website at http://www.sec.gov . For more information about FreeSeas Inc., please visit the corporate website, http://www.freeseas.gr .

The FreeSeas Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5981

Forward-Looking Statements

This press release contains forward-looking statements (as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) concerning future events and the Company's growth strategy and measures to implement such strategy, including expected vessel acquisitions. Words such as "expects,'' "intends,'' "plans,'' "believes,'' "anticipates,'' "hopes,'' "estimates,'' and variations of such words and similar expressions are intended to identify forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to be correct. These statements involve known and unknown risks and are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the Company. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, changes in the demand for drybulk vessels; competitive factors in the market in which the Company operates; risks associated with operations outside the United States; and other factors listed from time to time in the Company's filings with the Securities and Exchange Commission. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based.

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