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FreeSeas Reports Third Quarter And Nine Month 2010 Financial Results

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:

Year Amount Upcoming Obligations by Quarter
  (in 000s)   (in 000s)
2010 $15,423* Q4 2010 $15,423 *
2011 $13,890    
2012 $32,999**    
2013 $13,590    
2014 $13,590    
2015 $14,642    
2016 $22,275    
Total               $126,409    
       
*FreeSeas has already paid $4.7 million in principal as of November 8, 2010.  **Includes a balloon payment of $17.6 million due in November 2012, which FreeSeas currently intends to refinance, although there can be no assurances that it will be able to do so.

Fleet Employment (as of November 10, 2010)

         
Vessel Name Type Built Dwt Employment
M/V Free Envoy Handysize 1984 26,318 35 day time charter trip at $10,000 per day through November 2010
M/V Free Goddess Handysize 1995 22,051 60-65 day time charter trip at $11,250 per day through November 2010
M/V Free Hero Handysize 1995 24,318 25-30 day time charter trip at $12,000 per day through December 2010
M/V Free Impala Handysize 1997 24,111 45 day time charter trip at $9,000 per day for the first 40 days and then $11,000 per day through December 2010
M/V Free Jupiter Handymax 2002 47,777 Balance of time charter at $25,216 per day through February 2011 and any day in excess at $28,000 per day through May 2011
M/V Free Knight Handysize 1998 24,111 30-45 day time charter trip at $9,500 per day through December 2010
M/V Free Lady Handymax 2003 50,246 50-60 day time charter trip at $23,750 per day through December 2010
M/V Free Maverick Handysize 1998 23,994 35-40 day time charter trip at $12,000 per day through December 2010
M/V Free Neptune Handysize 1996 30,838 35-40 day time charter trip at $14,500 per day through December 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.

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