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FreeSeas Reports Third Quarter And Nine Month 2010 Financial Results

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.

PERFORMANCE INDICATORS
(All amounts in tables in thousands of United States dollars, except for fleet data )
         
  Three Months Ended Nine Months Ended
  September 30, 2010 September 30, 2009 September 30, 2010 September 30, 2009
EBITDA (2)  $ 6,020  $ 5,876  $ 21,877  $ 24,740
Fleet Data:        
Average number of vessels (3) 9.62 9.40 9.87 9.14
Ownership days (4) 885 865 2,695 2,494
Available days (5) 852 845 2,604 2,454
Operating days (6) 837 828 2,510 2,416
Fleet utilization (7) 98.2% 98.0% 96.4% 98.5%
Average daily results:        
Average TCE rate (8)  $ 14,918  $ 14,598  $ 16,586  $ 16,466
Vessel operating expenses (9) 5,234 5,624 5,442 4,918
Management fees (10) 540 548 561 526
General and administrative expenses (11) 1,020 836 1,034 1,001
Total vessel operating expenses (12)  $ 5,774  $ 6,172  $ 6,003  $ 5,444
         
(1) Adjusted net income reconciliation to net income:
Adjusted Net Income. We consider adjusted net income to represent net earnings before stock based compensation expense, unrealized (gain)/loss on derivative instruments, vessel impairment loss, (gain) or loss on sale of vessel and provision and write-offs of insurance claims and bad debts. Adjusted Net Income is a non-GAAP measure and does not represent and should not be considered as an alternative to net income or cash flow from operations, as determined by U.S. GAAP, and our calculation of Adjusted Net Income may not be comparable to that reported by other companies. Adjusted Net Income is included herein because it is an alternative measure of our liquidity performance and indebtedness.
  Three Months Ended Nine Months Ended
  September 30, 2010 September 30, 2009 September 30, 2010 September 30, 2009
Net income (loss)  $ (9,510)  $ 465  $ (4,815)  $ 7,222
Stock-based compensation expense 141 3 418 9
Unrealized swap (gains)/losses 21 44 99 (416)
Vessel impairment loss 9,569 -- 9,569 --
(Gain) on sale of vessel (807) -- (807) --
Provision and write-offs of insurance claims and bad debts 1,210 50 1,210 150
Adjusted Net Income  $ 624  $ 562  $ 5,674  $ 6,965
         
(2) EBITDA reconciliation to net income:
Adjusted EBITDA. We consider Adjusted EBITDA to represent net earnings before interest, taxes, depreciation and amortization, amortization of deferred revenue, back log asset, stock-based compensation expense, vessel impairment loss, (gain)/loss on derivative instruments, (gain) or loss on sale of vessel and provision and write-offs of insurance claims and bad debts. Under the laws of the Marshall Islands, we are not subject to tax on international shipping income. However, we are subject to registration and tonnage taxes, which have been included in vessel operating expenses. Accordingly, no adjustment for taxes has been made for purposes of calculating Adjusted EBITDA. Adjusted EBITDA is a non-GAAP measure and does not represent and should not be considered as an alternative to net income or cash flow from operations, as determined by U.S. GAAP, and our calculation of Adjusted EBITDA may not be comparable to that reported by other companies. Adjusted EBITDA is included herein because it is an alternative measure of our liquidity performance and indebtedness.
  Three Months Ended Nine Months Ended
  September 30, 2010 September 30, 2009 September 30, 2010 September 30, 2009
Net income (loss)  $ (9,510)  $ 465  $ (4,815)  $ 7,222
Depreciation and amortization 4,401 4,337 13,315 13,197
Amortization of deferred revenue (260) (83) (772) 179
Back log asset -- -- -- 907
Stock-based compensation expense 141 3 418 9
Vessel impairment loss 9,569 -- 9,569 --
(Gain)/loss on derivative instruments 177 167 541 5
Interest and finance cost, net 1,099 937 3,218 3,071
(Gain) on sale of vessel (807) -- (807) --
Provision and write-offs of insurance claims and bad debts 1,210 50 1,210 150
Adjusted EBITDA  $ 6,020  $ 5,876  $ 21,877  $ 24,740
         
(3) Average number of vessels is the number of vessels that constituted our fleet for the relevant period, as measured by the sum of the number of days each vessel was a part of our fleet during the period divided by the number of calendar days in the period.
(4) Ownership days are the total number of days in a period during which the vessels in our fleet have been owned by us. Ownership days are an indicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses that we record during a period.
(5) Available days are the number of ownership days less the aggregate number of days that our vessels are off-hire due to major repairs, dry dockings or special or intermediate surveys. The shipping industry uses available days to measure the number of ownership days in a period during which vessels should be capable of generating revenues.
(6) Operating days are the number of available days less the aggregate number of days that our vessels are off-hire due to any reason, including unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues.
(7) We calculate fleet utilization by dividing the number of our fleet's operating days during a period by the number of available days during the period. The shipping industry uses fleet utilization to measure a company's efficiency in finding suitable employment for its vessels and minimizing the amount of days that its vessels are off-hire for any unforeseen reasons. 
(8) Time charter equivalent, or TCE, is a measure of the average daily revenue performance of a vessel on a per voyage basis. Our method of calculating TCE is consistent with industry standards and is determined by dividing operating revenues (net of voyage expenses and commissions) by operating days for the relevant time period. Voyage expenses primarily consist of port, canal and fuel costs that are unique to a particular voyage, which would otherwise be paid by the charterer under a time charter contract. TCE is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company's performance despite changes in the mix of charter types (i.e., spot charters, time charters and bareboat charters) under which the vessels may be employed between the periods:
         
  Three Months Ended Nine Months Ended
  September 30, 2010 September 30, 2009 September 30, 2010 September 30, 2009
Operating revenues  $ 13,824  $ 13,077  $ 45,931  $ 43,000
Voyage expenses and commissions (1,338) (990) (4,301) (3,217)
Net operating revenues 12,486 12,087 41,630 39,783
Operating days 837 828 2,510 2,416
Time charter equivalent daily rate  $ 14,918  $ 14,598  $ 16,586  $ 16,466
         
(9) Average daily vessel operating expenses, which includes crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs, is calculated by dividing vessel operating expenses by ownership days for the relevant time periods:
         
  Three Months Ended Nine Months Ended
  September 30, 2010 September 30, 2009 September 30, 2010 September 30, 2009
Vessel operating expenses  $ 4,632  $ 4,865  $ 14,666  $ 12,266
Ownership days 885 865 2,695 2,494
Daily vessel operating expense  $ 5,234  $ 5,624  $ 5,442  $ 4,918
         
(10) Daily management fees are calculated by dividing total management fees paid on ships owned by ownership days for the relevant time period.
(11) Average daily general and administrative expenses are calculated by dividing general and administrative expenses (excluding stock-based compensation expense) by ownership days for the relevant period.
(12) Total vessel operating expenses, or TVOE, is a measurement of our total expenses associated with operating our vessels. TVOE is the sum of daily vessel operating expense and daily management fees. Daily TVOE is calculated by dividing TVOE by fleet ownership days for the relevant time period.
 
 
FREESEAS INC.
CONDENSED UNAUDITED STATEMENTS OF OPERATIONS
(All amounts in tables in thousands of United States dollars, except for share and per share data)
         
  For three months ended 30-Sep-10 (Unaudited) For three months ended 30-Sep-09 (Unaudited) For nine months ended 30-Sep-10 (Unaudited) For nine months ended 30-Sep-09 (Unaudited)
OPERATING REVENUES  $ 13,824  $ 13,077  $ 45,931  $ 43,000
         
OPERATING EXPENSES:        
Voyage expenses (532) (299) (1,638) (938)
Commissions (806) (691) (2,663) (2,279)
Vessel operating expenses (4,632) (4,865) (14,666) (12,266)
Depreciation expense (3,963) (3,910) (11,850) (11,996)
Amortization of deferred charges (438) (427) (1,465) (1,201)
Management and other fees to a related party (478) (474) (1,513) (1,312)
General and administrative expenses (1,044) (726) (3,204) (2,505)
         
Provision and write-offs of insurance claims and bad debts (1,210)   (1,210)  
Gain on sale of vessel 807 -- 807 --
Vessel impairment loss (9,569) -- (9,569) --
Income (loss) from operations  $ (8,041)  $ 1,685  $ (1,040)  $ 10,503
         
OTHER INCOME (EXPENSE):        
Interest and finance costs  $ (1,106)  $ (946)  $ (3,254)  $ (3,094)
Loss on derivative instruments (177) (167) (541) (5)
Interest income 7 9 36 23
Other (193) (116) (16) (205)
Other (expense)  $ (1,469)  $ (1,220)  $ (3,775)  $ (3,281)
         
Net income (loss)  $ (9,510)  $ 465  $ (4,815)  $ 7,222
         
Earnings/(loss) per share, basic and diluted  $ (1.51)  $ 0.08  $ (0.76)  $ 1.53
Weighted average number of shares, basic and diluted 6,313,496 5,631,296 6,313,496 4,705,060
  6,313,496 5,631,296 6,313,496 4,705,060
     
     
FREESEAS INC.    
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS     
(All amounts in tables in thousands of United States dollars, except for share and per share data)
     
     
  September 30, 2010 December 31, 2009
  (Unaudited)  
ASSETS    
     
CURRENT ASSETS:    
Cash and cash equivalents  $ 11,815  $ 6,341
Restricted cash -- 1,750
Trade receivables, net 1,918 2,011
Insurance claims 889 9,240
Due from related party 1,332 1,410
Inventories  1,020 601
Prepayments and other  476 772
Vessel held for sale 13,415 --
 Total current assets  $ 30,865  $ 22,125
     
Advances for vessels under construction 5,495  --
Fixed assets, net 234,303 270,701
Deferred charges, net 3,445 2,995
Restricted cash 1,500 1,500
 Total non-current assets  $ 244,743  $ 275,196
     
 Total Assets  $ 275,608  $ 297,321
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
     
CURRENT LIABILITIES:    
Account payable   $ 5,266  $ 10,746
Accrued liabilities  1,466 1,310
Due to related party  63 18
Unearned revenue 602 416
Derivative financial instruments - current portion 567 566
Deferred revenue-current portion 398 1,032
Bank loans - current portion  25,615 15,400
 Total current liabilities  $ 33,977  $ 29,488
     
Derivative financial instruments - net of current portion 782 684
Deferred revenue-net of current portion -- 138
 Bank loans - net of current portion 100,794 122,559
 Total long - term liabilities  $ 101,576  $ 123,381
     
Commitments and Contingencies    
SHAREHOLDERS' EQUITY:    
Common stock 6 6
Additional paid-in capital  127,493 127,075
Retained earnings  12,556 17,371
 Total shareholders' equity 140,055 144,452
 Total Liabilities and Shareholders' Equity  $ 275,608  $ 297,321
CONTACT:  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
         
          The Equity Group
          Investor Relations
          Adam Prior, Vice President
          212-836-9606
          aprior@equityny.com
          www.theequitygroup.com

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