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
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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.
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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.
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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.
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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:
| Year | Amount |
| (in thousands) | |
| 2011 | $8,763 |
| 2012* | $30,359 |
| 2013 | $14,350 |
| 2014 | $14,350 |
| 2015 | $21,075 |
| 2016 | $22,275 |
| Total | $111,172 |
* 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)
| Vessel Name | Type | Built | Dwt | Employment |
| M/V Free Lady | Handymax | 2003 | 50,246 |
About 3-5 month time charter at $14,000 per day for the first 120 days and $15,500 from 8 May through June 2011 |
| M/V Free Jupiter | Handymax | 2002 | 47,777 |
Minimum 60 to about 90 day time charter at $16,000 per day plus gross delivery bonus $270,000 through July/August 2011 |
| M/V Free Knight | Handysize | 1998 | 24,111 | About 80 day time charter trip at $10,000 per day through June 2011 |
| M/V Free Maverick | Handysize | 1998 | 23,994 |
About 62 day time charter trip at $9,100 per day through June 2011. Thereafter, the vessel has been fixed for an about 30 days time charter trip at $12,500 per day through July 2011 |
| M/V Free Impala | Handysize | 1997 | 24,111 | About 30 day time charter trip at $9,900 per day through June 2011 |
| M/V Free Neptune | Handysize | 1996 | 30,838 |
4-6 months time charter at $14,000 per day for the first 115 days and $15,250 from 20 April through June 2011. Thereafter, the vessel has been fixed for $13,500 per day through August/ September 2011 |
| M/V Free Hero | Handysize | 1995 | 24,318 |
About 50-70 days time charter trip at $11,000 per day through July/ August 2011 |
| M/V Free Goddess | Handysize | 1995 | 22,051 | 4-6 months time charter at $12,000 per day through August/October 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: http://www.investorcalendar.com/IC/CEPage.asp?ID=164284.
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, 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.
| FREESEAS INC. | ||
| PERFORMANCE INDICATORS | ||
| (All amounts in tables in thousands of United States dollars, except for fleet data ) | ||
| Three Months Ended | ||
| March 31, 2011 | March 31, 2010 | |
| Adjusted EBITDA (2) | $2,122 | $8,168 |
| Fleet Data: | ||
| Average number of vessels (3) | 9 | 10 |
| Ownership days (4) | 810 | 900 |
| Available days (5) | 796 | 900 |
| Operating days (6) | 761 | 845 |
| Fleet utilization (7) | 95.6% | 93.9% |
| Average daily results: | ||
| Average TCE rate (8) | $10,361 | $17,102 |
| Vessel operating expenses (9) | 4,909 | 5,208 |
| Management fees (10) | 577 | 589 |
| General and administrative expenses (11) | 1,356 | 990 |
| Total vessel operating expenses (12) | $5,486 | $5,797 |
| (1) Adjusted net (loss)/income reconciliation to net (loss)/income: | ||
| Adjusted net (loss)/income. We consider adjusted net (loss)/income to represent net (losses)/earnings before stock based compensation expense, unrealized (gain)/loss on derivative instruments, vessel impairment loss and bad debt provision. Adjusted net (loss)/ 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 (loss)/ income may not be comparable to that reported by other companies. Adjusted net (loss)/ income is included here in to facilitate comparability between FreeSeas performance in the reported periods and its performance in prior periods. | ||
| Three Months Ended | ||
| March 31, 2011 | March 31, 2010 | |
| Net (loss) / income | $ (3,111) | $2,697 |
| Stock-based compensation expense | 68 | 155 |
| Unrealized swap (gains)/losses | (142) | 4 |
| Vessel impairment loss | 768 | -- |
| Bad debt provision | 128 | -- |
| Adjusted net (loss) / income | $ (2,289) | $2,856 |
| (2) Adjusted EBITDA reconciliation to net (loss)/income | ||
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Adjusted EBITDA reconciliation to net (loss)/income: Adjusted EBITDA represents net (losses)/earnings before, taxes, depreciation and amortization, amortization of deferred revenue, loss on derivative instruments, stock-based compensation expense, vessel impairment loss, interest and finance cost net and bad debt provision. 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 performance. |
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| Three Months Ended | ||
| March 31, 2011 | March 31, 2010 | |
| Net (loss) / income | $ (3,111) | $2,697 |
| Depreciation and amortization | 3,361 | 4,411 |
| Amortization of deferred revenue | (136) | (254) |
| Stock-based compensation expense | 68 | 155 |
| Vessel impairment loss | 768 | -- |
| Loss on derivative instruments | 5 | 113 |
| Interest and finance cost, net of interest income | 1,039 | 1,046 |
| Bad debt provision | 128 | -- |
| Adjusted EBITDA | $2,122 | $8,168 |
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(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. |
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(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. |
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(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. |
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(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. |
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(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. |
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| (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 | ||
| March 31, 2011 | March 31, 2010 | |
| Operating revenues | $8,468 | $15,657 |
| Voyage expenses and commissions | (583) | (1,206) |
| Net operating revenues | 7,885 | 14,451 |
| Operating days | 761 | 845 |
| Time charter equivalent daily rate | $10,361 | $17,102 |
| (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 | ||
| March 31, 2011 | March 31, 2010 | |
| Vessel operating expenses | $3,976 | $4,687 |
| Ownership days | 810 | 900 |
| Daily vessel operating expense | $4,909 | $5,208 |
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(10) Daily management fees are calculated by dividing total management fees paid on ships owned by ownership days for the relevant time period. |
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(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. |
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| (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 CONSOLIDATED STATEMENTS OF OPERATIONS | ||
| (UNAUDITED) | ||
| FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2011 AND MARCH 31, 2010 | ||
| (All amounts in tables in thousands of United States dollars, except for share and per share data) | ||
| For three months ended | For three months ended | |
| 31-Mar-11 | 31-Mar-10 | |
| (Unaudited) | (Unaudited) | |
| OPERATING REVENUES | $8,468 | $15,657 |
| OPERATING EXPENSES: | ||
| Voyage expenses | (97) | (295) |
| Commissions | (486) | (911) |
| Vessel operating expenses | (3,976) | (4,687) |
| Depreciation expense | (3,035) | (3,922) |
| Amortization of deferred charges | (326) | (489) |
| Management and other fees to a related party | (467) | (530) |
| General and administrative expenses | (1,166) | (1,046) |
| Bad debt provision | (128) | -- |
| Vessel impairment loss | (768) | -- |
| (Loss)/income from operations | $ (1,981) | $3,777 |
| OTHER INCOME (EXPENSE): | ||
| Interest and finance costs | $ (1,042) | $ (1,066) |
| (Loss) on derivative instruments | (5) | (113) |
| Interest income | 3 | 20 |
| Other (expense)/income | (86) | 79 |
| Other expense | $ (1,130) | $ (1,080) |
| Net (loss)/income | $ (3,111) | $2,697 |
| Basic (loss)/earnings per share | $ (0.49) | $0.43 |
| Diluted (loss)/earnings per share | (0.49) | 0.43 |
| Basic weighted average number of shares | 6,353,496 | 6,313,496 |
| Diluted weighted average number of shares | 6,353,496 | 6,318,232 |
| FREESEAS INC. | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||
| (All amounts in tables in thousands of United States dollars) | ||
| March 31, 2011 | December 31, 2010 | |
| (Unaudited) | ||
| ASSETS | ||
| CURRENT ASSETS: | ||
| Cash and cash equivalents | $2,170 | $3,694 |
| Restricted cash | 2,824 | 5,255 |
| Trade receivables, net | 3,170 | 2,157 |
| Insurance claims | 80 | 133 |
| Due from related party | 1,315 | 1,285 |
| Inventories | 705 | 1,171 |
| Prepayments and other | 404 | 390 |
| Vessels held for sale | 38,214 | 13,606 |
| Total current assets | $48,882 | $27,691 |
| Advances for vessels under construction | 8,290 | 5,665 |
| Vessels, net | 185,471 | 213,691 |
| Deferred charges, net | 2,435 | 2,812 |
| Restricted cash | 1,125 | 1,125 |
| Total non-current assets | $197,321 | $223,293 |
| Total Assets | $246,203 | $250,984 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| CURRENT LIABILITIES: | ||
| Accounts payable | $6,194 | $4,323 |
| Accrued liabilities | 1,061 | 1,227 |
| Due to related party | 88 | 98 |
| Unearned revenue | 863 | 430 |
| Derivative financial instruments - current portion | 504 | 583 |
| Deferred revenue-current portion | -- | 136 |
| Bank loans - current portion | 45,538 | 23,022 |
| Total current liabilities | $54,248 | $29,819 |
| NON- CURRENT LIABILITIES: | ||
| Derivative financial instruments – net of current portion | 475 | 538 |
| Bank loans – net of current portion | 71,333 | 97,437 |
| Total long – term liabilities | $71,808 | $97,975 |
| Commitments and Contingencies | ||
| SHAREHOLDERS' EQUITY: | ||
| Common stock | 6 | 6 |
| Additional paid-in capital | 127,702 | 127,634 |
| Accumulated deficit | (7,561) | (4,450) |
| Total shareholders' equity | 120,147 | 123,190 |
| Total Liabilities and Shareholders' Equity | $246,203 | $250,984 |