FreeSeas Reports 2011 First Quarter Financial Results

/ Source: GlobeNewswire

PIRAEUS, Greece, June 7, 2011 (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 first quarter ended March 31, 2011.

Recent Developments - Sale of M/V Free Envoy

In line with the Company's fleet renewal commitment, on April 14, 2011, FreeSeas entered into an agreement to sell the M/V Free Envoy, a 1984-built, 26,318 dwt Handysize dry bulk carrier, for a sale price of $4.2 million. The vessel was delivered to the buyers in May 2011. An estimated gain of approximately $1.5 million will be realized in the second quarter of 2011.

Comments from Management

Mr. Ion G. Varouxakis, Chairman and CEO, stated, "The first quarter of the year saw record low charter rates for all segments of the dry-bulk market. A number of factors affected the rate environment during the quarter. Floods in Australia, and subsequent closing of port facilities, which afflicted Capesize vessels in particular; transportation demand out of China which was restrained; and the Japanese tsunami can be listed as demand driven causes for such a negative rate environment. Supply side pressures worsened the equation further, with Handysize vessels maintaining a healthier income outlook due to more favorable supply fundamentals than other asset classes. We expect Handysizes to continue to outperform other asset classes because of the limited orderbook, increased scrapping of over-age Handysize vessels, and stable demand of transportation for commodities in decreased parcel sizes. Factors such as the reconstruction of ravaged Japan and rebuilding of inventories are expected to bring a boost for the transportation of Handysize-transported commodities later in the year, while we expect that solid demand from emerging markets such as China, India and Africa will provide stable growth."

"Under this challenging market environment, the operational performance of the spot exposed FreeSeas fleet was negatively affected. We continued our fleet renewal program by selling the M/V Free Envoy, our oldest vessel. FreeSeas is well positioned to take advantage these conditions and expects to benefit from future rate increases."

Mr. Alexandros Mylonas, CFO, added, "During the first quarter, we continued to successfully implement our cost reduction initiatives, achieving a 10% reduction year-over-year of our total operating and general administrative expenses. Our bottom line was greatly impacted by the very weak charter rate environment we operated in during the first quarter of 2011. In regards to our balance sheet, the Company's net debt as of March 31, 2011 stands at $111 million reflecting a net debt to capital ratio of 45% (net debt over total liabilities and shareholders' equity). From the sale of M/V Free Envoy, we applied $3.7 million as a loan prepayment, further reducing our total indebtedness. We will continue working on improving our cost base and enhancing our liquidity."

First Quarter 2011 Financial Review

  • Operating revenues for the first quarter of 2011 were $8.5 million, as compared to $15.7 million reported during the same period of the prior year. The decrease is primarily due to the weak spot charter market and to a lesser degree a decrease of the average number of vessels in the Company's fleet to nine from ten in the prior year period.
     
  • Vessel operating expenses, which include crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs, for the first quarter of 2011 were $4.0 million as compared to $4.7 million for the same period of the prior year. The decrease was primarily due to the ownership of nine vessels versus ten during the same period of the prior year and the intensification of the cost cutting initiatives initiated in the fourth quarter of 2010. 
     
  • Net loss for the period was $3.1 million, or $0.49 loss per share based on 6.4 million basic and diluted weighted average number of shares, as compared to net income of $2.7 million, or $0.43 earnings per share based on 6.3 million basic and diluted weighted average number of shares, for the first quarter of 2010.
     
  • Adjusted net loss, which excludes (1) vessel impairment loss of $768,000, (2) bad debt provision of $128,000, (3) stock-based compensation expense of $68,000 and (4) unrealized swap gains of $142,000, for the first quarter of 2011 was $2.3 million, or $0.36 diluted loss per share, as compared to adjusted net income of $2.9 million, or $0.46 diluted earnings per share, for the first quarter of 2010.  A table reconciling adjusted net (loss)/ income to net (loss)/ income can be found in footnote (1) to this release. 
     
  • Adjusted EBITDA for the quarter was $2.1 million compared to $8.2 million in the prior year's quarter. A table reconciling adjusted EBITDA to net (loss)/ income can be found in footnote (2) to this release.

Balance Sheet and Debt Repayment Information

As of March 31, 2011, FreeSeas' cash and cash equivalents and restricted cash were $6.1 million and stockholders' equity was $120.1 million, compared to $10 million and $123.2 million, respectively, at December 31, 2010.  As of June 7, 2011, the Company's remaining scheduled principal repayments for 2011 total $8.8 million ($34.5 million of the short term debt refers to the assumed prepayment from the possible sale of M/V Free Hero, M/V Free Impala and M/V Free Neptune, which were classified under current liabilities since these three vessels were classified as "held for sale" at March 31, 2011).

The following table describes FreeSeas' annual scheduled debt repayment obligations to be due after June 7, 2011 through 2016:

*  Includes a balloon payment of $16 million due in November 2012. FreeSeas currently intends to refinance the $16 million balloon payment, although there can be no assurances that it will be able to do so.

Fleet Employment (as of June 7, 2011)

Conference Call with Accompanying Slide Presentation

The Company will discuss these results in a conference call later this afternoon at 12:00 p.m. ET.

Participant Dial-In Numbers:

(In the United States):   877-407-8031

(International):               201-689-8031

Webcast

The call will also be simultaneously broadcast over the Internet. To listen to the live webcast, please go to http://www.freeseas.gr and click on the conference call link, or go directly to: .

The Company will also have an accompanying slide presentation available in PDF on its website prior to the conference call.

The webcast will be archived and accessible for approximately 30 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. 

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 Handysize and 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, .

The FreeSeas Inc. logo is available at

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.

CONTACT: At the Company FreeSeas Inc. Alexandros Mylonas, Chief Financial Officer 011-30-210-45-28-770 Fax: 011-30-210-429-10-10 info@freeseas.gr www.freeseas.gr Investor Relations The Equity Group Adam Prior, Vice President aprior@equityny.com www.theequitygroup.com