Operating Revenue Increased 357 Percent in Third Quarter
Company Announces Quarterly Dividend of $.075 Per Share
PIRAEUS, Greece, Nov. 13, 2008 (GLOBE NEWSWIRE) -- FreeSeas Inc. (Nasdaq:FREE) (Nasdaq:FREEW) (Nasdaq:FREEZ) ("FreeSeas" or "the Company"), a provider of seaborne transportation for drybulk cargoes, announced today unaudited operating results for the third quarter ended September 30, 2008.
Financial Highlights
* Operating revenues grew by 357.5% compared to the same quarter of 2007, to $22.32 million from $4.88 million. * Net income for the third quarter of 2008, was $9.36 million or $0.44 basic earnings per share based on 21,171,329 common shares outstanding, compared with a net loss of $0.50 million, or $0.07 basic loss per share based on 6,674,627 common shares outstanding for the same quarter of 2007. * Adjusted EBITDA for the quarter ended June 30, 2008 increased by 537% as compared to the same period in 2007, to $15.11 million from $2.37 million. * Our average TCE rate for the quarter increased by 67.7% to $28,558 from $17,028 for the year earlier period.
Dividend Information
* The Company also announced today that it has declared a quarterly dividend of $0.075 per share on its common stock outstanding. The dividend will be paid on November 24, 2008 to shareholders of record as of December 3, 2008.
Fleet Developments
Overall, FreeSeas reported a 191% increase in operating days in the third quarter of 2008 compared with same period in 2007 reflecting approximately 8.3 vessels in 2008 as opposed to an average of 3.2 in the same quarter of 2007.
Free Destiny
July 23: The Company announced that the Free Destiny was delivered to her charterers for a 60 to 90 day spot charter at a rate of $28,500 per day.
September 18: FreeSeas announced that the Free Destiny had been delivered to her charterers for spot charter of approximately 40 days at a rate of $18,000 per day.
Free Envoy
July 9: The Company announced that the Free Envoy was delivered to her charterers for a time charter of approximately one year at a rate of $32,000 per day.
Free Lady
July 7: The Free Lady, a 2003-built, 50,246 dwt Handymax vessel, was delivered to FreeSeas and began a two-year time charter at a rate of $51,150 per day
Free Maverick
September 2: FreeSeas announced that it had taken delivery of the 1998-built, 23,994 dwt Handysize vessel Free Maverick. The Free Maverick is currently employed on a time-charter through April/July 2009 at $32,000 per day.
Mr. Ion Varouxakis, President and CEO, commented, "Over the past two years we have built a solid operating company. We have modernized and dramatically increased the size of our fleet. We have entered into valuable charter contracts with some of the most credit-worthy charterers in our industry. We have invested in the handysize segment, which represents less charter volatility. Today's results are the culmination of many years of hard work and carefully thought out investment and operational decisions. We have today announced net income for the third quarter of 2008 in excess of $9.3 million compared to a loss of $0.5 million in the comparable period last year. FreeSeas has a sustainable position in the market."
Varouxakis continued, "As we announce these results, we are witnessing a complete change, if not reversal, in the business environment as the current global financial crisis has slowed international trade and caused a drop in charter rates from all-time highs in May to below vessel operating costs. We expect to take advantage of attractive acquisition opportunities which may arise only once in a generation.
Our Board has determined that the company's strategy must adapt to the new reality. Retaining cash will add to our financial flexibility in order to aggressively take advantage of the opportunities as they are presented.
Therefore, our Board has decided to revise our dividend policy. The dividend shall now represent 50% of distributable cash flow, after taking into consideration the company's expenses, debt service, and reserves including reserves for further capital investments into the shipping sector, as may be determined each quarter by the Board of Directors. We believe that better long-term value can be achieved for our shareholders under this new policy. In accordance with this revised policy, we have declared, today, a dividend of $.075 per share with respect to the third quarter of 2008. Based upon our closing stock price of $1.98, this represents a current yield of 15.2%."
Mr. Varouxakis concluded, "With substantial insider ownership of outstanding common stock, we have given due consideration to the expectations that had been set in the past, measured against a dramatically reshaped business environment. We are confident that our shareholders will realize, in the light of the Company's exceptionally strong performance, that we are making these decisions from a position of strength."
Conference Call
As previously announced, the Company will host a conference call on November 13, 2008 at 4:15PM Eastern Time to review the results as well as management's outlook for the business. The call, which will be hosted by FreeSeas' management, may contain information beyond what is included in this earnings press release.
To participate in the call from the United States or Canada, please dial +1.888.694.4702 approximately five minutes prior to the starting time. To participate in the call outside the United States or Canada, please dial +1-973-582-2741 five minutes prior to the starting time. The Conference ID is 7249-2444.
Two hours after the completion of the conference call, a digital recording of the call will be available for seven days, and can be accessed by dialing +1.800.642.1687 from inside the United States or Canada and +1.706.645.9291 from outside the United States or Canada and entering the Conference ID 7249-2444.
The call, which will be simultaneously broadcast live over the Internet, can be accessed at: http://www.videonewswire.com/event.asp?id=52848. The online archive of the broadcast will be available within one hour of the live call at the same web address and will remain available for one month.
Current fleet:
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Vessel Name Dwt Vessel Type Built Employment
---------------------------------------------------------------------
Free Destiny 25,240 Handysize 1982 Employment pending
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Free Envoy 26,318 Handysize 1984 One-year time-charter
at $32,000 p/d through
June/August 2009
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Free Goddess 22,051 Handysize 1995 Two-year time-charter
through November 2009
at $19,250 p/d
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Free Hero 24,318 Handysize 1995 Time-charter through
December 2008 /February
2009 at $14,500 p/d
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Free Impala 24,111 Handysize 1997 One-year time-charter
through April 2009 at
$31,500 p/d
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Free Jupiter 47,777 Handymax 2002 Three-year time-charter
through February 2011
at $32,000/28,000/
24,000 p/d
---------------------------------------------------------------------
Free Knight 24,111 Handysize 1998 One-year time-charter
through March 2009 at
$31,500 p/d
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Free Lady 50,246 Handymax 2003 Two-year time-charter
through June/ September
2010 at $51,150 p/d
---------------------------------------------------------------------
Free Maverick 23,994 Handysize 1998 Time-charter through
April/July 2009 at
$32,000 p/d
---------------------------------------------------------------------
About FreeSeas Inc.
FreeSeas Inc. is a Marshall Islands corporation with principal offices in Piraeus, Greece. FreeSeas is engaged in the transportation of dry bulk cargoes through the ownership and operation of dry bulk 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, FREEW 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 www.sec.gov. For more information about FreeSeas Inc., please go to our corporate website, www.freeseas.gr.
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 dry bulk 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.
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS
(All amounts in tables in thousands of United States dollars, except
for share data)
September 30,
2008 December 31,
(Unaudited) 2007
-----------------------
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 4,119 $ 63,394
Trade receivables, net 391 60
Insurance claims 16,121 16,116
Due from related party 1,580 1,037
Inventories 611 499
Back log assets 1,587
Prepayments and other 1,015 334
-----------------------
Total current assets $ 25,424 $ 81,440
Fixed assets, net 279,774 108,021
Deferred charges, net 3,899 2,161
Restricted cash 1,500 350
-----------------------
Total non-current assets $ 285,173 $ 110,532
-----------------------
Total assets $ 310,597 $ 191,972
=======================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Account payable $ 10,016 $ 3,181
Accrued liabilities 8,557 16,713
Unearned revenue 1,531 783
Deferred revenue-current portion 277 1,620
Derivatives financial instruments at fair
value 256
Bank loans - current portion 55,200 11,800
-----------------------
Total current liabilities $ 75,837 $ 34,097
Derivatives financial instruments at fair
value 582 749
Deferred revenue 877
Bank loans - net of current portion 116,250 44,500
-----------------------
Total long term liabilities $ 117,709 $ 45,249
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Common stock 20 20
Additional paid-in capital 110,297 115,464
Retained earnings accumulated/(deficit) 6,734 (2,858)
-----------------------
Total shareholders' equity $ 117,051 $ 112,626
-----------------------
Total liabilities and shareholders'
equity $ 310,597 $ 191,972
=======================
FREESEAS INC.
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(All amounts in thousands of United States dollars, except for
share and per share data)
For the three months For the nine months
ended ended
30-Sep-08 30-Sep-07 30-Sep-08 30-Sep-07
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
OPERATING REVENUES $ 22,320 $ 4,879 $ 45,900 $ 12,709
OPERATING EXPENSES:
Vessel operating ex-
penses (4,797) (1,319) (12,178) (3,632)
Voyage expenses (105) (289) (185) (328)
Depreciation expense (3,940) (1,148) (8,980) (2,615)
Amortization of defe-
rred charges (244) (206) (518) (603)
Management and other
fees to a related
party (582) (225) (1,614) (585)
Commissions (1,082) (265) (2,242) (747)
Stock-based compensa-
tion expense (28) (25) (82) (75)
General and adminis-
trative expenses (707) (330) (2,013) (1,314)
Gain on sale of
vessel 1,369
----------- ----------- ----------- -----------
Income from
operations $ 10,835 $ 1,072 $ 18,088 $ 4,179
OTHER INCOME
(EXPENSE):
Interest and finance
costs $ (1,573)$ (1,310)$ (4,093)$ (1,863)
Loss on debt exting-
uishment (639)
Change in derivatives
fair value (36) (362) (90) (362)
Interest income 38 157 573 196
Other (expense) 92 (55) (13) (25)
----------- ----------- ----------- -----------
$ (1,479)$ (1,570)$ (4,262)$ (2,054)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income\(loss) $ 9,356 $ (498)$ 13,826 $ 2,125
=========== =========== =========== ===========
Basic earnings\(loss)
per share $ 0.44 $ (0.07)$ 0.66 $ 0.33
Diluted earnings (loss) per share $ 0.43 $ (0.07)$ 0.62 $ 0.30
Weighted average
number of shares:
Basic 21,171,329 6,674,627 20,950,346 6,347,850
Diluted 21,539,704 6,674,627 22,330,808 6,996,198
FREESEAS INC.
PERFORMANCE INDICATORS
(All amounts in tables in thousands of United States dollars, except
for fleet data )
Three Months Ended Nine Months Ended
30-Sep-08 30-Sep-07 30-Sep-08 30-Sep-07
EBITDA (1) $ 15,111 $ 2,371 $ 27,573 $ 7,372
Fleet Data:
Average number of
vessels (2) 8.26 3.24 6.80 2.85
Ownership days (3) 760 298 1,864 776
Available days (4) 760 269 1,810 747
Operating days (5) 740 254 1,693 715
Fleet utilization (6) 97.4% 85.2% 90.8% 92.1%
Average Daily Results:
Average TCE rate (7) $ 28,558 $ 17,028 $ 25,678 $ 16,271
Vessel operating ex-
penses (8) 6,311 4,426 6,533 4,680
Management fees (9) 601 755 665 754
General and adminis-
trative expenses(10) 955 1,299 1,189 1,838
Total vessel opera-
ting expenses (11) $ 6,912 5,181 7,198 5,434
(1) EBITDA reconciliation to net income:
Adjusted EBITDA represents net earnings before interest, taxes,
depreciation and amortization and change in the fair value of
derivatives. Adjusted EBITDA does not represent and should not be
considered as an alternative to net income or cash flow from
operations, as determined by United States generally accepted
accounting principles, or 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. The following
is a reconciliation of adjusted EBITDA to net income:
Three Months Ended Nine Months Ended
30-Sep-08 30-Sep-07 30-Sep-08 30-Sep-07
----------- ----------- ----------- -----------
Net income (loss) $ 9,356 $ (498)$ 13,826 $ 2,125
Depreciation and amo-
rtization 4,184 1,354 9,498 3,218
Change in derivatives
fair value 36 362 90 362
Interest and finance
cost 1,535 1,153 3,520 $ 1,667
Loss on debt exting-
uishment 639
----------- ----------- ----------- -----------
Adjusted EBITDA $ 15,111 $ 2,371 $ 27,573 $ 7,372
=========== =========== =========== ===========
(2) 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.
(3) 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.
(4) 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.
(5) 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.
(6) We calculate fleet utilization by dividing the number of our
fleet's operating days during a period by the number of ownership
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 reasons such as scheduled repairs, vessel upgrades, or
dry dockings or other surveys. Note that there is some variability
within the industry on this definition and we believe that our
definition represents a conservative approach.
(7) 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
30-Sep-08 30-Sep-07 30-Sep-08 30-Sep-07
----------- ----------- ----------- -----------
Operating revenues $ 22,320 $ 4,879 $ 45,900 $ 12,709
Voyage expenses and
commissions (1,187) (554) (2,427) (1,075)
Net operating
revenues 21,133 4,325 43,473 11,634
Operating days 740 254 1,693 715
----------- ----------- ----------- -----------
Time charter equiva-
lent daily rate $ 28,558 $ 17,028 $ 25,678 $ 16,271
=========== =========== =========== ===========
(8) 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
30-Sep-08 30-Sep-07 30-Sep-08 30-Sep-07
----------- ----------- ----------- -----------
Vessel operating
expenses $ 4,797 $ 1,319 $ 12,178 $ 3,632
Ownership days 760 298 1,864 776
----------- ----------- ----------- -----------
Daily vessel opera-
ting expense $ 6,311 $ 4,426 $ 6,533 $ 4,680
=========== =========== =========== ===========
(9) Daily management fees are calculated by dividing total management
fees paid on ships owned by ownership days for the relevant time
period.
(10) Average daily general and administrative expenses are
calculated by dividing general and administrative expenses by
operating days for the relevant period.
(11) 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.