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FreeSeas Reports Second Quarter And Six Month 2010 Financial Results

Market Conditions and Outlook

Mr. Ion Varouxakis, Chairman and CEO, noted, "We are pleased to report solid financial results for the second quarter of 2010 reflecting our focus on the Handysize market. The Handysize sector has consistently outperformed the other dry bulk segments over the last quarters, and our spot exposure has allowed the Company to benefit from a healthy charter rate environment. We are optimistic about the outlook of the Handysize market because of what we see to be growing demand and balanced fleet growth. FreeSeas is continuing to generate excess cash flow and is well positioned to renew its fleet, taking advantage of its liquidity and its relationships with financial institutions."

Mr. Alexandros Mylonas, CFO, added, "We continue to focus on deleveraging the Company, while building our cash position in order to take advantage of vessel acquisition opportunities. We reduced our net debt from $121.1 million at March 31, 2010 to $114.2 million at June 30, 2010, translating into a net debt over total assets ratio of approximately 39%."

Financial Review for the Second Quarter of 2010
  • Operating revenues for the second quarter of 2010 were $16.5 million, as compared to $12.4 million reported during the same period of the prior year. The increase is primarily due to higher rates earned during the period along with the addition of the M/V Free Neptune, which the Company purchased in August 2009. The Company's operating revenues for the second quarter of 2010 improved by $793,000 as compared to the first quarter of 2010. This represents the fourth consecutive quarter that the Company has reported sequential revenue growth.
  • Vessel operating expenses for the second quarter of 2010 were $5.3 million as compared to $3.9 million for the same period of the prior year. This increase was primarily due to increased ownership days following the addition of the M/V Free Neptune and the one off expenses related to the dry-dock of the M/V Free Knight. Additionally, these expenses should be viewed in light of the Company's expenses for the second quarter of 2009, which reflected the effect of the Company's vigorous cost-cutting initiatives taken during that quarter as a response to the deteriorating market conditions at the time.
  • Income from operations for the second quarter of 2010 was $3.2 million, as compared to $1.5 million reported in the prior year period, largely as a result of higher operating revenues.
  • Net income for the second quarter of 2010 was $2.0 million, or $0.06 diluted earnings per share based on 31.7 million diluted shares, as compared to net income of $560,000, or $0.03 diluted earnings per share based on 21.2 million diluted shares, for the second quarter of 2009.
  • Adjusted net income for the second quarter of 2010 was $2.2 million, or $0.07 diluted earnings per share, as compared to $160,000, or $0.01 diluted earnings per share, for the second 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 June 30, 2010 was $7.7 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 Six Month Financial Review
  • Operating revenues for the first six months of 2010 were $32.1 million, an increase of 7.3% from $29.9 million in the comparable period of the prior year, largely due to the increase in the size of the Company's fleet due to the addition of the M/V Free Neptune.
  • Vessel operating expenses totaled $10.0 million for the first half of 2010, as compared to $7.4 million for the comparable period of the prior year. This increase was primarily due to the reasons detailed in the second quarter review.  
  • Income from operations for the first six months of 2010 was $7.0 million, compared to $8.8 million in the prior year period (please see below explanation).
  • Net income for the first six months of 2010 was $4.7 million, or $0.15 diluted earnings per share based on 31.6 million diluted shares outstanding, as compared to net income of $6.8 million, or $0.32 diluted earnings per share based on 21.2 million diluted shares outstanding, for the first half of 2009 (please see below explanation).
  • Adjusted net income for the first half of 2010 was $5.1 million, or $0.16 diluted earnings per share, as compared to $6.3 million, or $0.30 diluted earnings per share, for the first half of 2009 (please see below explanation). A table reconciling adjusted net income to net income can be found in footnote (1) to this release. 
  • Adjusted EBITDA for the first half of 2010 was $15.9 million, compared to $18.8 million in the prior year period (please see below explanation). A table reconciling adjusted EBITDA to net income can be found in footnote (2) to this release.

Income from operations, net income, adjusted net income and adjusted EBITDA for the six months ended June 30, 2010 decreased compared to the same period ended in 2009. This is primarily attributable to the higher vessel operating expenses during the 2010 six-month period which were not offset by the increase of the operating revenues posted in the same period. In addition, the Company's higher general and administrative expenses during the first six months of 2010 were mainly as a result of higher non-cash stock-based compensation expense of $277,000 compared to $6,000 in the prior year period and the write-off of capitalized expenses of $184,000.

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