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FreeSeas Reports Fourth Quarter And Year End 2010 Financial Results

Comments on Deleveraging and Cash Generation

Mr. Alexandros Mylonas, CFO, added, "FreeSeas generated $20.8 million of cash from operations during 2010, which was partially used to fund its growth plans and reduce the Company's debt position. We are proceeding with our deleveraging strategy and this is evidenced by our net debt, which has been reduced from $128.4 million at December 31, 2009 to $110.4 million at December 31, 2010. Additionally, we very closely monitor our cost base and vessels maintenance in order to produce above average fleet utilization and consistently low operating and general and administrative expenses. We continue to maintain low daily operating expenses on our Handysize fleet, in addition to maintaining the lowest daily general and administrative expenses in the industry. This provides FreeSeas with flexibility in our operations, which we have taken advantage of during these volatile market conditions."

Fourth Quarter 2010 Financial Review

  • Operating revenues for the fourth quarter of 2010 were $11.7 million, as compared to $14.5 million reported during the same period of the prior year. The decrease is primarily due to the lower rates earned during the period along with lower number of operating days driven by the sale of M/V Free Destiny in August 2010.  
  • Vessel operating expenses, which include crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs, for the fourth quarter of 2010 were $3.9 million as compared to $5.5 million for the same period of the prior year, and $4.6 million sequentially from the third quarter of 2010. The decrease was primarily due to the intensification of the vessel operating cost cutting initiatives in the fourth quarter of 2010 and the ownership of 9 vessels versus 10 during the same period of the prior year.  
  • Vessel impairment loss of $17.2 million during the period from the potential sale of M/V Free Impala.  
  • Net loss for the period of $17.0 million, or $2.69 per share based on 6.3 million basic and diluted weighted average number of shares, as compared to a net loss of $363,000, or $0.06 per share based on 6.2 million basic and diluted weighted average number of shares, for the fourth quarter of 2009.  
  • Adjusted net income, which excludes (1) vessel impairment loss of $17.1 million, (2) provision and write-offs of insurance claims and bad debts of $40,000, (3) stock-based compensation of $141,000 and (5) unrealized swap gains of $228,000, for the fourth quarter of 2010 was $9,000, or $0.00 diluted earnings per share, as compared to $89,000, or $0.01 diluted earnings per share, for the fourth 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 was $5.0 million compared to $5.7 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 Financial Review

  • Operating revenues for 2010 were $57.7 million, a slight increase compared to $57.5 million in the prior year. The slight increase is attributable to the increase of the average number of vessels in our fleet from 9.35 for the year ended December 31, 2009 to 9.65 for the year ended December 31, 2010, which was partially offset by the lower average daily TCE rate of $15,742 in the year ended December 31, 2010 compared to an average daily TCE rate of $16,105 in the year ended December 31, 2009.  
  • Vessel operating expenses totaled $18.6 million for 2010, as compared to $17.8 million for the comparable period of the prior year. The slight increase which is translated to daily operating expenses of $5,282 in 2010 versus $5,218 in 2009 is mainly attributed to the higher operating expenses incurred during vessels dry-dockings which amounted to four in 2010 compared to three in 2009.  
  • Vessel impairment loss of $26.6 million reflecting the impairment loss of $17.2 million and $9.4 million from the potential sale of M/V Free Impala and M/V Free Hero.  
  • Net loss for 2010 of $21.8 million, or $3.46 loss per share based on 6.3 million basic and diluted weighted average number of shares outstanding, as compared to net income of $6.9 million, or $1.35 basic and diluted earnings per share based on 5.1 million diluted shares outstanding, for the year ended December 31, 2009.  
  • Adjusted net income, which excludes (1) vessel impairment loss of $26.6 million for the M/V Free Hero and M/V Free Impala, (2) provision and write-offs of insurance claims and bad debts of $1.3 million, (3) stock-based compensation of $559,000, (4) gain on sale of M/V Free Destiny of $0.8 million and (5) unrealized swap gains of $129,000, for 2010 was $5.7 million, or $0.90 basic and diluted earnings per share, as compared to $6.9 million, or $1.36 basic and diluted earnings per share, for the year ended December 31, 2009. A table reconciling adjusted net income to net income can be found in footnote (1) to this release.  
  • Adjusted EBITDA for 2010 amounted to $27.0 million, compared to $30.3 million in the prior year. 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 December 31, 2010, FreeSeas' cash and cash equivalents and restricted cash were $10.1 million and stockholders' equity was $123.2 million, compared to $9.6 million and $144.5 million, respectively, at December 31, 2009. The Company's principal repayments total $23.0 million for 2011 (including $8.8 million expected prepayment from the sale of M/V Free Hero).

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