FreeSeas Reports Fourth Quarter and Year End 2010 Financial Results

PIRAEUS, Greece, March 4, 2011 (GLOBE NEWSWIRE) --

Highlights

• Reported adjusted net income of $5.7 million or $0.90 basic and diluted earnings per share for the full year of 2010. Including various non-recurring items, the Company reported a net loss of $21.8 million or $3.46 basic and diluted loss per share for the full year of 2010. A table reconciling adjusted net income to net income can be found in footnote (1) to this release.
• Reported adjusted EBITDA of $26.8 million for the full year of 2010. A table reconciling adjusted EBITDA to net income can be found in footnote (2) to this release.
• Generated $20.8 million in cash from operations for the full year of 2010.
• Reported adjusted net income of $9,000 or $0.00 basic and diluted earnings per share for the fourth quarter of 2010. Including various non-recurring items such as a non-cash vessel impairment charge, the Company reported a net loss of $17.0 million or $2.69 basic and diluted loss per share for the last quarter of 2010. A table reconciling adjusted net income to net income can be found in footnote (1) to this release.
• Reported adjusted EBITDA of $5.0 million for the fourth quarter of 2010. A table reconciling adjusted EBITDA to net income can be found in footnote (2) to this release.
• Reported net debt of $110.4 million at December 31, 2010, reflecting a net debt to capital ratio of 44%.

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 fourth quarter and year ended December 31, 2010. All per-share amounts have been adjusted to reflect the Company's 1-for-5 reverse stock split effective October 1, 2010.

Comments from Management

Mr. Ion Varouxakis, Chairman and CEO, stated, "We are pleased to report solid operating results for the fourth quarter of 2010 and for the year ended in December 31, 2010, which included significant deleveraging for the Company along with strong cash generation. 2010 was the beginning of our fleet renewal process with the ordering of two high-specification newbuilding Handysize vessels expected to be delivered in the second and third quarters of 2012. The financing of these vessels has already been arranged on favorable terms, subject to customary loan documentation for up to an amount of $32.4 million. As such, we expect to replace some of our older tonnage with our newbuildings, making timely sales depending on market conditions. We believe that this strategy will allow the Company to take advantage of pricing arbitrage opportunities in our sector between second-hand and newbuilding vessels, a trend that has persisted so far throughout the volatility of chartering rates. We believe that the strong demand for commodities, which is evidenced from stable or increasing prices among iron ore, coal, steel, and grain coupled with increased ton-mile demand from pockets of strong growth such as US Gulf, South America and India will improve vessels utilization and substantially increase rates. We feel that we are well positioned to take advantage of the current volatile dry bulk market."

Discussion on Recent Market Conditions

Mr. Varouxakis continued, "While the fourth quarter of the year saw weakened rates in the dry bulk sector due to an unprecedented combination of floods in Australian leading to the closure of most exporting ports there, a strong dollar caused by Eurozone weakness, temporary subdued demand from China, and the stalling of iron ore exports out of India due to local regulatory issues, we saw throughout the year overall healthy rates for Handysize and Handymax vessels. We expect to see continued volatility in rates throughout the coming year and, using our spot strategy, expect to take advantage of seasonal peaks such as, for example, the grain season in the spring which is expected to lead to increased demand for our vessels. In the last couple of years, Handysize vessels have been outperforming other asset classes during most periods of rate weakness, a trend we expect to continue."

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).

The following table describes FreeSeas' annual debt repayment obligations for 2011 through 2016:

Fleet Employment (as of March 4, 2011)

Conference Call with Accompanying Slide Presentation

The Company will discuss these results in a conference call later this morning at 9:00 a.m. ET.

The conference call will also be broadcast live via the "Investor Relations" section of FreeSeas' website at www.freeseas.gr or interested parties can click on the following link: http://www.investorcalendar.com/IC/CEPage.asp?ID=163535.

The Company will also have an accompanying slide presentation available approximately 30 minutes prior to the conference 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.

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.